EXHIBIT 10.5
FTC
COMMERCIAL CORP.
FACTORING AGREEMENT
TO: XXXXX XXXX, LLC D/B/A/ XXXXXXX XXXX DATE: October 12, 2005
000 XXXX 00XX XXXXXX
XXX XXXXXXX, XX 00000
Ladies and Gentlemen:
This Factoring Agreement (the "AGREEMENT") sets out the terms,
provisions and conditions on which we will act as your factor.
1. PURCHASE OF ACCOUNTS:
We will purchase from you and you will sell to us accounts receivable
created by your sales of goods to or performance of services for customers
approved by us in amounts approved by us without recourse to you for insolvency
or nonpayment for financial inability to pay, except as set forth herein, after
the goods or services have been actually delivered to and finally accepted
without claim or dispute by your customer. An "account receivable" or "account"
means any right to payment of a monetary obligation which is the net amount due
from a customer for all sales of goods or performance of services to such
customer whether performed or yet to be performed. You will tender to us for our
approval or rejection, which such approval or rejection shall be determined in
our sole discretion, all of your accounts except those which we have agreed in
writing that you may exclude (as set forth in the list attached hereto as
SCHEDULE A and modified from time to time). This Agreement applies to all
accounts heretofore or hereafter purchased by us from you. We may at any time,
in our sole discretion, revoke our approval of any of your customers or reduce
the maximum amount which you may xxxx to any customer, but such revocation or
reduction shall neither affect sales where goods have been shipped or services
have been performed nor render us liable to you or any other person or entity
for any loss or damage sustained by reason thereof.
You shall pay us a one-time set-up and integration fee of zero dollars
($0.00) for setting you up in our system (including establishment of the Reserve
Account). Such set-up and integration fee shall also cover the initial addition
of your customer base to our computer system and further introduction of any new
customers for a period of six (6) months from the effective date of this
Agreement.
The customer shall be deemed insolvent if: (a) the customer shall have
absconded; (b) the customer becomes insolvent as defined in Section 101(32) of
the Bankruptcy Code; (c) a receiver shall have been appointed for the customer
or its assets; (d) the customer shall have made a general offer of compromise to
his creditors for less than his indebtedness; (e) the customer's stock in trade
shall have been taken possession of or sold under a security agreement or writ
of attachment or sold or transferred in bulk or otherwise sold out of the normal
course of business; (f) the customer's business shall have been assigned to, or
taken over by an assignee or trustee for the benefit of his creditors or a
committee appointed by his creditors; (g) a voluntary or involuntary proceeding
shall have been instituted with respect to the customer under any bankruptcy,
reorganization, receivership or other law providing for the financial relief of
debtors; (h) the customer has stated to us a financial inability to pay;
provided, however, that insolvency shall not be deemed to have occurred when
caused by armed conflict, terrorism, or resistance thereto.
All invoices for merchandise sold or services rendered shall be
prepared by you and shall contain terms of sale as well as provisions for
disputes, specifically providing for arbitration, attorney fees, jurisdiction in
Los Angeles, California and the application of California law. No change from
the original terms of sale shall be made without our prior written consent. All
invoices for merchandise sold or services rendered shall bear a notice that such
invoice has been assigned to, and is owned by and payable directly and only to
us. You shall furnish us with copies of all invoices within twenty-one (21) days
from the earlier of the invoice date or shipping date, accompanied by duly
executed confirmatory assignment schedules, original shipping or delivery
receipts, and such other information or documents as we in our discretion may
request from time to time. If you fail to provide us with copies of such
invoices (or the equivalent) or such proof of shipment or delivery when
requested by us for any factor risk account receivable, such factor risk account
receivable shall automatically convert to client risk account receivable and
immediately upon such conversion, regardless of any prior credit approval, we
shall have no credit risk with respect to such account receivable.
2. PAYMENT FOR ACCOUNTS:
You shall deliver to us immediately after shipment of goods or
performance of services either copies of invoices sent to your customers or, at
our sole discretion, such other proof or evidence, including, without
limitation, electronic or computer data, as shall in our sole judgment
satisfactorily confirm and substantiate the creation of an account receivable,
together with carriers' receipts or other evidence of shipment suitable to us
showing the delivery of goods or services covered by each invoice. Upon your
request, upon your certification that an account has been created, and upon our
written approval the credit standing of the account debtor and the amount and
terms of the sale of the goods or performance of service, we will remit to you
the net amount of accounts purchased by us, or such portion thereof as you may
from time to time request, less the reserve hereinafter
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provided for. We may at any time set off against amounts due you or we may xxxx
you for service charges, interest, expenses, liability for repurchases, or other
items chargeable to you. We will furnish you with advices of charges set off
against amounts due you, and we will send you a statement as of the closing of
business on the last day of each calendar month or such other closing date as we
and you shall agree upon. Should you purchase goods or services from another of
our clients and the account arising from such purchase be sold to us, then we
may at any time without notice to you set off the balance due us on such account
against amounts we owe you. We will make advances and all advances will be
billed to you at a fee for such advance at thirty dollars ($30) per wire
transfer.
Outstanding factoring advances shall not at any time exceed the
"maximum factoring advances amount", which shall be defined, as of any date of
determination, as an amount equal to (i) up to eighty five percent (85%) of the
purchase price of all accounts purchased by us from you from time to pursuant to
this Agreement less (ii) such reserves as we, in our sole discretion, elect to
establish, including, without limitation, reserves for concentration accounts,
"client's risk accounts" (as defined in SECTION 4 below), disputed accounts, and
non-disputed accounts. We shall not make a factoring advance to the extent such
factoring advance would cause the aggregate amount of factoring advances then
outstanding to exceed the maximum factoring advances amount. If at any time an
overadvance exists, then you shall pay to us, or we may charge the Factoring
Account (as defined in SECTION 3 below) with, such amount as may be necessary to
eliminate the overadvance. Without affecting your obligation to immediately
repay the overadvance, you agree to pay us a fee in the amount of three percent
(3.0%) above Prime Rate as defined in Section 27 for each day that an
overadvance exists. Amounts owing by you under this SECTION 2 may be repaid and
made available again to you at any time prior to the earliest of (i)
acceleration of your obligations to us pursuant to SECTION 17 or (ii) the
termination date of this Agreement.
3. RESERVE REQUIREMENT:
Fifteen percent (15%) of all unpaid accounts purchased by us and one
hundred percent (100%) of all such accounts which are disputed or which you may
be obligated to repurchase (including, without limitation, any "client's risk
account" as defined in SECTION 4) shall be held by us as cash collateral
(hereinafter the "RESERVE") against which we may at any time charge any
liability you may now or hereafter owe us, directly or indirectly. We shall have
the right to change the percentage of unpaid accounts at which the reserve will
be maintained at any time without notice to you as we in our sole discretion
shall deem necessary for our protection. Should any notice of termination of
this Agreement be sent by either party or should we terminate without notice as
provided for in SECTION 17, then we may hold one hundred percent (100%) of all
unpaid accounts as such reserve. We may, in our sole discretion, withhold a
reserve from any payment to you should we have reason to believe sufficient
objection to the amount owed may be raised by a customer, court of competent
jurisdiction, or other relevant third party. The reserve required hereunder
shall be maintained with us in an account designated as the "Factoring Account."
4. CLIENT'S RISK ACCOUNTS:
We may in our sole discretion from time to time purchase accounts which
arise from sales to customers not approved by us or which are offered to us at
or after their maturity, which shall be known as "client's risk accounts." Any
client's risk account purchased by us shall be with recourse to you for the full
amount thereof. You shall repurchase any client's risk account from us
immediately upon our request, whether or not such account has matured. Should
our purchase of the accounts of customers approved by us result in any
indebtedness of such customer to us in an amount in excess of the amount of
credit approved by us, then such amount in excess shall be treated between us as
a client's risk account, and at our request you shall reimburse us such amount
in excess, but we shall not return such account to you until it is paid in full.
Any payment received by either of us from any source on account of a customer,
regardless of how designated, shall be applied first to the reduction of the
credit risk assumed by us as to such customer. If you purchase or lease from
your customer goods or services and your customer claims a right of set-off,
then the accounts arising from sales to such customers shall also be client's
risk accounts. Your normal terms of sale are net 8/10 EOM and/or net 30. Our
Factoring Service Charge and our credit approval are based on your use of your
normal terms of sale. You agree to notify us if you offer your customers terms
longer than the terms noted above. Any change of terms of sale without our prior
written consent shall make such account a client's risk account. We may from
time to time condition our credit approval for certain customers on terms
shorter than your normal terms and you agree to abide by those shorter terms.
In the event that monies shall, at any time be owing from a single
account debtor for both approved and client's risk accounts, all payments
received will be first applied to approved accounts.
5. TITLE AND SECURITY INTEREST:
Delivery to us either of an invoice or copy thereof or of electronic or
computer data evidencing an account, upon our acceptance thereof, shall transfer
and convey to us title to such account and its proceeds and all your rights and
interests in the goods sold or services performed and all of your rights and
powers under the sales contract and as unpaid seller, including the right of
replevin, reclamation and stoppage in transit, subject to no encumbrance
whatsoever. Upon our request you shall deliver to us all documents of title in
your control relating to such goods. Notwithstanding your failure to deliver to
us either an invoice or copy thereof or electronic or computer data evidencing
an account, as security for your obligations under this Agreement and as
security for the prompt repayment of any indebtedness to us, whether now
existing or hereafter incurred, including, without limitation, any indebtedness
arising from your purchase of goods or services from any client of ours where
the account arising from such purchase has been sold to us, you hereby pledge
and assign to us and grant to us a security interest, subject to no encumbrance
whatsoever, in all your right, title and interest in and to the following (the
"Collateral"): (i) all of your presently existing and hereafter created
accounts; (ii) all of your presently existing and hereafter acquired
merchandise, inventory and goods, together with all goods and materials used or
usable in manufacturing, processing, packaging or shipping same, in all stages
of production, from raw materials through work-in-process to finished goods,
wherever located, and all additions and substitutions to, replacements of,
insurance or other proceeds of, and documents covering any of the foregoing;
(iii) any and all general intangibles of client, presently existing or hereafter
arising, including general
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intangibles as defined in the Uniform Commercial Code, chooses in action,
proceeds, contracts, distributions, dividends, refunds (including, but not
limited to local, state and/or federal tax refunds), security deposits,
judgments, insurance claims, any right to payment of any nature, intellectual
property rights or licenses, any other rights or assets of Client customarily or
for accounting purposes classified as general intangibles, and all documentation
and supporting information related to any of the foregoing, and all proceeds
thereof; (iv) all balances, reserves, deposits, debts or any other amounts or
obligations of factor owing to client, including, without limitation, any
rebates, the Reserve, and any other amounts owing pursuant to this Agreement,
whether or not due, now existing or hereafter arising or created, and all
proceeds thereof; (v) all equipment and goods as defined in the Uniform
Commercial Code, all motor vehicles, including all tires, accessories, spare and
repair parts, and tools, wherever located, and all related right, title and
interest, of client, now owned or hereafter acquired or created, all additions
and accessions to, replacements of, insurance or condemnation proceeds of, and
documents covering any of the foregoing, all leases of any of the foregoing, and
all rents, revenues, issues, profits and proceeds arising from the sale, lease,
license, encumbrance, collection, or any other temporary or permanent
disposition of any of the foregoing or any interest therein (collectively, the
"Equipment"); and (vi),all proceeds and products of each of the foregoing, and
all books, records and documents relating thereto, in written, electronic or
other form. We shall have the right to sell all or any portion of the Collateral
at public or private sale, the right to collect and take control of any proceeds
of all or any portion of the Collateral, and all other rights and remedies of a
secured party under the UCC.
You will on our request execute such further assignments, conveyances,
financing statements and other written instruments as we may reasonably request
to perfect our title and security interest.
To the extent authorized by law, including the UCC, you authorize us to
file, without your signature, or to sign your name as debtor, financing
statements or continuations, in order to create or maintain the security
interests granted to us in this Factoring Agreement.
You hereby grant to us a fully paid-up, non-exclusive license (the
"License") to use all of the trademarks and trade names owned by you in
connection with any sales of inventory by us made pursuant to the terms of this
Agreement. The grant of the License shall be irrevocable, but shall terminate
concurrently with the repayment in full by you of all obligations and the
termination of this Agreement. You agree to use your best efforts to obtain the
consent of your licensors, if any, to permit us to sell inventory otherwise
subject to a license in the manner and to the extent permitted to you under the
applicable license agreement.
6. NOTICE OF ASSIGNMENT AND COLLECTIONS:
You shall do all billing, and all invoices shall bear the following
legend, or such other legend as we from time to time in our sole discretion may
request:
"This account has been assigned to, is owned by and is payable in par
U.S. funds only to FTC Commercial Corp., to whom notice must be given
of any claim, dispute or any other reason for non-payment. If necessary
to perfect our title or security interest or if requested by us, each
page of your books of accounts receivable or duplicate invoices shall
show thereon a notation that the accounts therein have been sold to us.
We may at any time in our sole discretion give notice of any sale to
any person. Any proceeds received by you of an account sold to us shall
be immediately forwarded to us in the identical form in which
received."
7. RETURNED GOODS:
Should any goods billed to an account purchased by us either be
rejected or returned or be recovered by you through the exercise of the rights
of replevin, reclamation or stoppage in transit, or otherwise, you shall
immediately pay to us the price we paid you for such account. Until receipt by
us of such purchase price, you shall hold such goods in trust for us at your own
risk and expense, which goods shall be segregated from all other goods set aside
and shall be clearly marked as our property. Upon our request you shall deliver
to us all documents of title in your control relating to such goods. In addition
to our rights and remedies provided in SECTION 5 with regard to the Collateral,
we may take possession of and sell such goods at public or private sale at your
expense for the purpose of paying your obligation to us. Such sale shall
extinguish your indebtedness to us only to the extent that the net proceeds of
the sale are applied thereto. Should you or your agent grant any allowance or
rebate, you shall immediately pay us the full amount of such allowance or
rebate.
8. DEDUCTIONS AND DISPUTES:
Should any customer fail or refuse to pay us the full amount of any
invoice or account or request an adjustment because of any claim or dispute
based on alleged shortage, defects, noncompliance or failure to deliver, set-off
or for any other reason other than the financial inability of such customer to
pay or the customer's insolvency, you shall immediately notify us and shall
adjust any such dispute or claim at your own expense. When we first have
knowledge of a deduction, claim or dispute we will give you all information we
have pertaining to it, but we shall have no further responsibility to assist you
in settling it. It shall be our policy to permit you thirty (30) days [sixty
(60) days in the case of an alleged failure to deliver] from the earlier of the
date we send you notice of a deduction, claim or dispute or the date you
otherwise learn of such deduction, claim or dispute to effect a settlement.
Notwithstanding the foregoing policy and any extension or leniency which we may
grant, if at any time we, in our sole judgment, deem it necessary for our
protection, you shall on our demand repurchase a disputed account or claim from
us. We may at any time set off the claimed or disputed amount of any account, or
any part thereof, or the amount of any client's risk account, or any part
thereof, against any amount due you or we may charge such amount against the
reserve or any other collateral of yours which we hold. You will indemnify us
for and hold us harmless from any liability for or expense on account of any
deduction or claim of any of your customers arising from a merchandise dispute
or claim. Any adjustment or credit to an account by you shall be immediately
communicated to us, and you shall forward to us immediately an amount equal to
the difference between the amount of the account before adjustment and its
adjusted outstanding balance. Should notice of termination of this Agreement be
sent by either party for any reason you shall immediately repurchase all
disputed accounts from us and pay us the price we paid you therefor. After we
have demanded that you repurchase an invoice or account from us under this
SECTION 8, we shall not thereafter be obligated to again purchase such invoice
or account from you unless we elect to do so after you have resolved all
deductions, claims and disputes affecting it.
9. REPURCHASE OF ACCOUNTS:
When you become obligated to repurchase an invoice or account, you
shall thereupon be liable to us for the net amount thereof, and it shall not be
necessary for us to tender such invoice or account to you until you have paid
us. We may retain such account and will have a security interest therein as
security for your obligation to pay the repurchase price, and we may sell any
such account at public or private sale, collect and take control of any proceeds
of any such account, or exercise
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any other remedy available to us as a secured party under the UCC and apply the
net proceeds of the disposition of an account to the satisfaction of such
repurchase price or to satisfy any other of your obligations hereunder.
10. EXCESS CREDIT MEMORANDA AND OVERPAYMENTS:
In the event that you for any reason whatsoever issue in favor of any
of your customers a credit memorandum relating to a specific account that is in
excess of the amount due on such account or in the event that we for any reason
whatsoever receive payment on an account from any of your customers in an amount
that is in excess of the amount due on such account, and such credit memorandum
or overpayment is subsequently remitted to you by us, then you hereby agree to
indemnify us for and hold us harmless from any and all claims, suits,
proceedings, penalties, assessments, costs and expenses of whatever kind and
description arising from or relating or incident to the holding and remittance
of credit memoranda and overpayments pursuant to this SECTION 10, including,
without limitation, any and all claims, penalties and assessments made or
asserted by any customer, by any federal, state or local governmental body,
agency or taxing authority, or by any other person or entity.
11. REPRESENTATIONS, WARRANTIES, AND COVENANTS:
By indicating your acceptance of this Agreement you represent, warrant
and covenant that:
a) you currently are and during the term of this Agreement shall
continue to be a corporation, limited liability company
partnership or proprietorship duly organized, validly existing
and in good standing under the laws of the state of your
organization, and duly qualified and in good standing in every
other jurisdiction in which the conduct of your business or
the ownership of property makes such qualification necessary
under applicable law;
b) the execution, delivery and performance of this Agreement are
within your organizational powers and are not in contravention
of any law, rule or regulation, the terms of your
organizational papers or any judgment, indenture, agreement or
undertaking to which you are a party or by which you or any of
your property is bound;
c) you are and during the term of this Agreement shall be the
owner of all your goods and inventories, and, without our
prior written consent, you shall not create or suffer to exist
any lien or encumbrance on or any security interest in such
goods and inventories or on or in any other of the Collateral,
other than the security interest created in our favor by this
Agreement;
d) each account offered to us for purchase under this Agreement
shall represent a bona fide sale of goods from you or
performance of services by you to your customer and, with
respect to each such account, you shall be the lawful owner
thereof with good right and title to pledge, assign and sell
the same subject to no encumbrances whatsoever;
e) the net amount shown on each invoice shall be legally owing by
such customer, and payment by the customer according to the
terms of the invoice including, without limitation, payment
with any applicable late fee, penalty, charge or interest,
shall not violate any federal, state or local law, statue,
rule or regulation; the grant of the security interest herein
in SECTION 5, shall be subject to no encumbrances whatsoever;
f) there shall be no set-off, counterclaim or defense to the
right to payment of such net amount shown as due on each such
invoice;
g) the goods sold under each such invoice shall have been
delivered to the customer or to a carrier or, with our
consent, shall be held by you after billing, all in accordance
with the purchase contract;
h) the sales evidenced by each such invoice shall not have been
in violation of any law, governmental regulation or order;
i) the sales evidenced by each such invoice shall have been
approved by us and our approval shall not have expired or been
revoked by us, or shall have given rise to an account that we
have elected to purchase from you under SECTION 4 hereof;
j) an invoice shall have been delivered to the customer showing
the account to have been sold to and payable to us and you
shall take such other steps as required by the laws of your
state to perfect our title to the account and goods underlying
it;
k) you have identified to us the state in which you are
organized, all tradenames, tradestyles or other assumed or
fictitious business names (sometimes referred to as "DBA" or
"doing business as" names) that you use; (ii) you will advise
us in writing if you commence using any other such names in
the future; and (iii) upon our request therefor, you will
provide to us evidence of your registration of all such names
in all jurisdictions in which such registration is required by
law; and that
l) you will notify us at least ten (10) days prior to the
occurrence of a change of your state of incorporation or
organization or a change of the state of your principal place
of business;
m) you will permit us and any authorized representatives
designated by us to visit and inspect any of your properties,
including your collateral, financial and accounting records,
and to make copies and take extracts therefrom, and to discuss
your affairs, finances and business with your officers and
independent public accountants, at such reasonable times
during the normal business hours and as often as may be
reasonably requested. You acknowledge that we intend to make
such inspections from time to time.
n) you warrant and represent that there has been no material
adverse change in your financial condition as reflected in the
financial statements delivered to us since the date thereof
nor do such statements fail to disclose any fact or facts
which materially adversely affect your financial condition;
and there is no litigation pending or threatened, which taken
in the aggregate if adversely determined, can reasonably be
expected to have a material adverse affect on your financial
condition.
12. BOOKS AND RECORDS:
You will keep adequate and proper books and records showing all sales,
claims, allowances and losses on goods sold, and such books and records and all
correspondence and papers relating thereto shall be open for inspection by us or
our agent at all reasonable times. Annually within ninety (90) days after the
close of your fiscal year you shall furnish us with your balance
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sheet and related statement of profit and loss and summary of statement of cash
flows of such year certified or reviewed as to their correctness by an
independent certified public accountant acceptable to us, and you will from time
to time furnish us interim statements of condition and other financial
information as we may reasonably require.
13. TAXES:
Should any excise, sale, use or other tax or levy be imposed by any
federal, state or local authorities requiring deduction or withholding from the
proceeds of sale or account, or if your customer is authorized to withhold or
deduct such tax or levy, then you shall immediately pay us the amount of any tax
or levy so withheld, and you will indemnify us for and hold us harmless from any
loss or expenses on account of such tax.
14. SET OFF:
Any and all sums at any time owed by us to you or deposited by you with
us shall at all times constitute security for any and all liabilities you may
now or hereafter owe us, and we may apply or set off such sums against any
liabilities you owe us at any time whether or not such sums are then due.
15. BREACH OF WARRANTY AND AGREEMENTS:
Should you breach or fail to perform any of your obligations or
liabilities hereunder and such breach continue for ten (10) days after you have
notice of such breach or notice thereof has been sent to you, or should you at
any time breach a warranty made by you under SECTION 11 hereof, then you will on
our demand immediately repurchase from us all accounts then held by us which
were purchased from you, and you will pay us the full amount thereof with
interest at the highest legal rate from the date of our demand. You agree to pay
all costs associated with the collection of such amounts, including, without
limitation, fifteen percent (15%) of all such amounts due to us as attorney's
fees if collected by or through an attorney-at-law. Our forbearance, consent to
a deviation from the terms hereof, or failure to exercise any right or power
arising because of a breach by you hereunder shall not constitute a waiver as to
any subsequent breach, whether or not we know about such breach, unless such
right or power shall have been expressly waived by us in writing.
16. OFFER AND ACCEPTANCE:
This writing is an offer by us to you which shall remain open for ten
(10) days from the date first above written, but after ten (10) days from said
date your acceptance hereof shall be deemed a counteroffer to us which we can
accept or reject. Upon your acceptance hereof or our acceptance of your
counteroffer, then this Agreement shall constitute the sole agreement between us
concerning our purchase of your accounts effective as of the date first above
written and shall supersede all prior agreements between us on the subject
hereof. Your acceptance hereof shall be made by your execution and delivery of
this Agreement to us at our office in Los Angeles, California, and our
acceptance or rejection of your counteroffer will be made at our office in Los
Angeles, California.
17. TERMINATION:
Either of us may terminate this Agreement at any time after the Initial
Period (the sixty (60) day commencing on the Effective Date) for any reason
whatsoever by giving the other at least sixty (60) days prior written notice. We
may terminate this Agreement at any time without notice to you should any of the
following events (each an "Event of Default") occur: you breach any of your
representations, warranties or covenants hereunder; any guarantor of any of your
obligations hereunder (a "guarantor") breach any of his, her or its
representations, warranties or covenants under any guaranty to us; you, any
guarantor or any of your affiliates or any guarantor breach any of his, her or
its representations, warranties or covenants under any other agreement between
us and you, any guarantor and/or any of your affiliates or any document or
instrument to us or for our benefit; you or any guarantor make an assignment for
the benefit of creditors; you or any guarantor make any transfer in bulk and not
in the ordinary course of business of a major part of your or his, her or its
materials, supplies, merchandise, or other inventory; you or any guarantor
abandon or cease to operate your business; you or any guarantor dissolve,
liquidate, die, merge, consolidate, reorganize or change your or his, her or its
type of organization or jurisdiction of organization; you or any guarantor apply
to any tribunal for the appointment of a custodian, receiver, or any trustee for
you or a substantial part of your or his, her or its assets; you or any
guarantor commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statue of
any jurisdiction, whether now or hereafter in effect; you or any guarantor have
filed against you or him, her or it any such application or have commenced
against you, him, her or it any such proceeding and, as a result of such
application or in such proceeding an order for relief is entered or such
proceeding remains unstayed and undismissed for a period of thirty (30) days or
more; any guarantor challenges his, her or its guaranty or seeks to terminate
his, her or its guaranty; we reasonably believe you or any guarantor to be
insolvent or have experienced a material adverse change in your or his, her or
its financial condition; more than twenty-five percent (25%) of your equity
securities be sold, assigned, transferred or encumbered to any one other than a
current equity owner. Upon the effective date of termination all of your
obligations shall become immediately due and payable in full without notice or
demand, and we shall have no obligation to purchase any accounts from you,
regardless of whether we previously approved any orders or accounts. The
security interest granted herein shall continue in full force and effect until
all of your obligations to us are paid in full. In the event that you elect to
terminate this Agreement other than in accordance with the provisions hereof or
if we terminate this Agreement as the result of an Event of Default terminates,
you shall pay to us, any we may charge the Factoring Account with, an amount
equal to twenty-five percent (25%) of the Reserve, not as a penalty but as
liquidated damages to compensate us for loss of profits, recovery of expenses,
and other damages resulting from such termination. You acknowledge and agree
that it would be very difficult or impossible to calculate such amounts and that
twenty-five percent (25%) of the Reserve is a fair estimation of those amounts.
Upon payment in full of all of your obligations to us, including without any
limitation all interest and attorneys' fees and costs (if any) due to us, we
shall terminate the security interest and remit to you the balance, if any, of
the Reserve.
18. CHOICE OF LAW:
This Agreement is made in Los Angeles, California, and is to be
performed under and shall in all respects be governed by the laws of the State
of California without regard to the conflicts of law principles thereof. Any
terms herein which are defined in the UCC as in effect as of the date hereof
shall be given the same meaning herein as in the UCC (unless otherwise defined
herein).
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19. JURISDICTION AND VENUE:
You agree that any civil suit or action arising from or in any way
relating or incident to this Agreement may be brought against you either in the
Superior Court of Los Angeles County, California, or in the United States
District Court for the Central District of California, Los Angeles Division, and
you hereby irrevocably waive, to the fullest extent permitted by law, any
objections that you may now or hereafter have to the laying of the venue of any
such civil suit or action and any claim that such civil suit or action has been
brought in an inconvenient forum, and you further agree that final judgment in
any such civil suit or action shall be conclusive and binding upon you and may
be enforced by a suit upon such judgment in any court of competent jurisdiction.
20. ATTORNEY-IN-FACT:
You hereby appoint us to be your attorney-in-fact, authorized to (i)
sign and execute in your name any transfer, conveyance or instrument in writing
that may, in our sole judgment, be necessary or desirable to effect a
disposition of all or any portion of the Collateral, (ii) endorse in your name
all checks and drafts received on an account that we own or have a security
interest in, and (iii) do all other things that may, in our sole judgment, be
necessary or desirable to protect our security interest or to carry out the
intent of this Agreement. You hereby ratify and approve, to the fullest extent
permitted by law, all acts that we, as your attorney-in-fact, shall do. You
further agree that we shall not be liable to you or to any other person or
entity for any loss or damage resulting from any act of commission or omission,
any error of judgment, or any mistake of fact or of law. This power of attorney,
which is coupled with an interest, is irrevocable so long as you are obligated
or indebted to us under this Agreement.
21. INDEMNITY:
You hereby agree to protect, indemnify and hold harmless us and all of
our directors, officers, employees and agents from and against any and all (i)
claims, demands and causes of action of any nature whatsoever brought by any
third party and arising from or related or incident to this Agreement, (ii)
costs and expenses incident to the defense of such claims, demands and causes of
action including, without limitation, reasonable attorneys' fees and court
costs, and (iii) liabilities, judgments, settlements, penalties and assessments
arising from such claims, demands and causes of action. The indemnity contained
in this SECTION 21 shall survive the termination of this Agreement.
22. HEADINGS:
The headings used in this Agreement are for your convenience to
generally identify the subject matter of each section, but they are not a part
of this Agreement and are not a representation that different subject matter
does not appear in a section.
23. INTEREST, FEES AND FACTORING SERVICE CHARGES:
So long as no event of default has occurred and is continuing, in
consideration of the services and risks undertaken by us in this Agreement, you
will pay us the following service charges and the following interest calculated
on the basis of a 360-day year and computed at a rate of interest equal in
amount to the Prime Rate, with any change in the rate of interest resulting in a
change in the Prime Rate being effective as of the opening of business on the
first day of each calendar month based upon the Prime Rate in effect at the
close of business on the last day of said calendar month, and remaining in
effect up to the opening of business on the first day of the next succeeding
calendar month.
FACTORING SERVICE CHARGE
You shall pay us a commission in an amount equal to eight tenths of one
percent (.80%) of the net amount of each account receivable for the
first sixty (60) day term or part thereof, plus one quarter of one
percent (.25%) of such net amount for each additional thirty (30) day
term or part thereof, but in no event less than $3.00 (three dollars)
per invoice. Factoring fees payable to us hereunder are based on your
usual and regular selling terms which do not exceed sixty (60) days.
However, no such increase in terms or dating shall be granted without
our prior written approval. In order to induce us to provide you with
client credit approval on certain accounts which we may not otherwise
credit approve, you agree that we shall have the right to charge to you
a surcharge. The amount of such surcharge shall be in any amount to be
determined by us in our sole discretion on any such account which you
request us to credit approve and which we agree to credit approve. The
accounts subject to a surcharge are those accounts where the account
debtor is the subject of a pending bankruptcy proceeding, the account
debtor is not adequately capitalized in our opinion or the account
debtor is viewed by us (on the basis of various economic factors
considered by us) as being substantially more unlikely to timely pay
the account than other account debtors whose accounts are then being
credit approved by us. Nothing in this section shall require us to
credit approve any account, even if you agree that we can charge you a
surcharge in connection with such account. All factoring fees or
charges are due when posted and charged to your Factoring Account.
We reserve the right to impose an additional factoring service charge
(a "surcharge") or other charges on any customer on which we deem it
necessary upon notice to you.
INTEREST CHARGE (AVERAGE NET DAILY OUTSTANDING)
Interest calculated on the basis of the Average Net Daily Outstanding
(ANDO) Method plus Three (3) business days shall be charged on the
average net daily balance of advances made to you pursuant to SECTION 2
of this Agreement, and shall be payable monthly on the last day of each
calendar month.
INTEREST RATE
1. Interest shall be based on a 360 day year and shall be charged
to the reserve account as of the last day of each month. For
purposes of computing interest payable by you under this
Agreement and supplement hereto, all customers checks and
other payments received by us shall be deemed
-6-
applied to the obligations the same day as credited to you. We
shall credit you all payments by customers of accounts
receivable and other payments on your behalf promptly after
crediting such payment to customer's accounts.
2. Notwithstanding subparagraph 1, we shall credit you with the
net unpaid amount of any receivable, less our commission and
any other fees, costs or expenses to which we may be entitled
hereunder, and less any amount thereof which is subject to
claim or dispute by the customer, upon the first to occur of
(a) payment by the customer of such amount, (b) if the
customer files a petition for bankruptcy relief or a petition
for bankruptcy relief is filed against the customer and not
dismissed within sixty (60) days thereafter, the maturity date
of such receivable (on the longest terms thereof), or (c) one
hundred twenty (120) days after the maturity date of such
receivable (on the longest terms thereof).
3. The Interest rate charged will be the Prime Rate plus one
percent (1.0%) pursuant to this Section 23 or as otherwise set
forth in this Agreement.
24. FACTORING SPECIAL PROVISIONS:
The following are special terms and provisions which are a part of this
Agreement and prevail over any printed provisions to the contrary or
inconsistent therewith:
You agree to pay all costs and expenses, to include reasonable
attorney's fees, whether incurred by in-house or outside counsel, in connection
with the preparation, execution, administration and enforcement of this
Agreement, to include search fees and public record filing fees. You shall pay
all reasonable expenses of Factor relating to the negotiation, drafting of
document, and documentation of this Agreement, and administration of this
Agreement, including without limitation, the costs and expenses identified in
this provision, whether incurred in entering into this Agreement, in future
amendments or modifications of this Agreement, or in ongoing administration of
this Agreement. These fees may be charged to your Factoring Account. The above
legal fees will be at $375.00 per hour.
You agree to pay us fees, costs, expenses (including attorney fees) and
costs of settlement incurred in collecting upon or enforcing rights against the
Collateral or incurred in any action to enforce this Agreement or the other
factoring documents or to collect any payment due from you or any other
factoring facility party under this Agreement or any other factoring documents
or incurred in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement, whether in the nature of a "workout"
or in connection with any insolvency or bankruptcy proceedings or otherwise.
You agree to pay us at the rate designated by us from time to time, by
memorandum to you or in the Operations Manual, for: (a) any special reports you
ask us to prepare specifically for you; (b) wire transfers; (c) placing for
collection accounts which are at client risk (or your share of our cost if an
account has amounts at both your risk and at our risk) plus 10% of any amounts
collected; (d) other fees charged by us for incidental factoring services which
are charged to all our factoring clients; and (e) other fees on which we have
agreed. Fees may be charged to your Factoring Account as incurred or billed to
you, at our option. Our fees may be changed from time to time upon notice to
you; however, our failure to give you such notice does not constitute a breach
of this Agreement and does not impair our ability to institute any such change.
Fees for such services as of the date hereof are scheduled on EXHIBIT A hereto.
Upon the occurrence of an Event of Default, Client agrees to pay all
costs and expenses, including reasonable attorney fees and legal expenses,
incurred by Factor in enforcing or exercising any remedies under this Agreement
or any other rights and remedies.
Client agrees to pay all expenses, including reasonable attorney fees
and legal expenses, incurred by Factor in any bankruptcy proceedings of any type
involving Client, this Agreement, or the Collateral, including, without
limitation, expenses incurred in modifying or lifting automatic stay,
determining adequate protection, use for cash collateral or relating to plan of
reorganization.
In the event that you receive a commitment from an alternative lender
to fund a similar facility after the initial twelve months of the Agreement,
Factor will retain the right of refusal to match the structure.
You agree that you will submit all invoices to us electronically. You
will be given a grace period of ninety (90) of the date of this Agreement to
commence submitting such invoices electronically, and thereafter, if invoice are
not submitted electronically, you shall pay us a fee of one half percent (0.5%)
over the interest rate provided in Section 23.
25. GENERAL:
This Agreement contains the entire understanding between the parties,
except as provided herein, and may not be waived or amended except by a writing
signed by you and us. The Agreement shall be binding upon you and us and our
respective successor and assigns, provided that you may not assign any of your
rights or obligations hereunder without the written consent of us. All sums due
under this Agreement, and all sums calculated under this Agreement shall be in
the currency of the United States.
26. NON-BINDING MEDIATION OF CUSTOMER DISPUTES:
YOU AGREE THAT YOU WILL ATTEMPT TO RESOLVE DISPUTES WITH ANY CUSTOMER
ON ACCOUNTS RECEIVABLE WE HAVE PURCHASED FROM YOU PURSUANT TO THE TERMS OF THE
FTC COMMERCIAL CORP. NON-BINDING MEDIATION RULES IN EFFECT AT THE TIME OF ANY
SUCH DISPUTE.
27. DEFINITIONS:
"BANKRUPTCY CODE" shall mean The Bankruptcy Code of 1978, as amended
and in effect from time to time (11 U.S.C. ss. 101 ET SEQ.).
"BUSINESS DAY" shall mean a day of the year on which commercial banks
are not required or authorized to close in Los Angeles, California.
"DOLLAR" and the sign "$" shall mean lawful money of the United States
of America.
"PRIME RATE" shall mean the average money center bank prime lending
rate as quoted in the Wall Street Journal, Western Edition, as may be adjusted
from time to time, which such rate may not be the lowest or best lending rate
made available by such banks.
-7-
"UCC" shall mean the Uniform Commercial Code of California, as in
effect from time to time.
28. NOTICES:
All notices, requests and other communications to either party
hereunder shall be in writing (including bank wire, telecopy or similar
teletransmission or writing), shall be in the English language, and shall be
given to such party at its address or applicable teletransmission number as such
party may hereafter specify by notice to the other party. Each such notice,
request or other communication shall be effective (i) if given by mail, five
Business Days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid, (ii) if given by telecopy, when
such telecopy is transmitted to the telecopy number specified in this SECTION 28
and the appropriate confirmation is received, (iii) if given by a reputable
overnight courier service, the Business Day after such communication is
delivered to such courier device for overnight delivery, or (iv) if given by any
other means (including, without limitation, by air courier), when delivered or
received at the address specified in this SECTION 28.
Address:
if to Client, XXXXX XXXX, LLC d/b/a/ XXXXXXX XXXX
000 Xxxx 00xx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxx Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and if to FTC Commercial Corp., FTC Commercial Corp.
0000 X. Xxxxxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
29. BANKRUPTCY CONSIDERATIONS:
In addition to any other covenants made herein by Client, Client
covenants that it will notify FTC Commercial Corp. of any voluntary or
involuntary bankruptcy petition filed by or against Client or any guarantor of
this Agreement under the United States Bankruptcy Code, within twenty-four (24)
hours of any such filing. Failure to notify FTC Commercial Corp. of any such
bankruptcy filing within twenty-four (24) hours shall constitute an Event of
Default.
Client acknowledges that this Agreement is a contract to extend debt
financing or financial accommodations to or for the benefit of Client within the
meaning of 11 U.S.C. ss.365(c)(2) and, as such, may not be assumed or assigned.
FTC Commercial Corp. shall be under no obligation to purchase accounts under
this Agreement from and after the filing of any voluntary or involuntary
petition against Client. However, FTC Commercial Corp. may, at its sole option,
agree to provide post-petition financing to the debtor and/or
debtor-in-possession after the filing of a voluntary or involuntary bankruptcy
petition by or against Client. Any such agreement to provide post-petition
financing shall not obligate FTC Commercial Corp. to purchase accounts until
such time as the Bankruptcy Court approves the post-petition financing
agreement.
30. JURY WAIVER, EXCLUSIVE JURISDICTION OF CALIFORNIA COURTS:
Client hereby irrevocably submits to the jurisdiction of any State or
Federal court sitting in Los Angeles County, California in any action or
proceeding arising out of or relating to this Agreement, or any other
agreements, and Client hereby irrevocably agrees that all claims, with respect
to such action or proceeding may be heard and determined in such State court or,
to the extent permitted by law, in such Federal court. Client hereby irrevocably
waives, to the fullest extent Client may effectively do so, the defense of
inconvenient forum to the maintenance of such action or proceeding. Client
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing of copies of such process to Client's address
specified in the Agreement. Client agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other matter provided by law.
Nothing in this Section shall affect FTC Commercial Corp.'s right to serve legal
process in any other manner permitted by law or affect FTC Commercial Corp.'s
right to bring an action or proceeding against Client or Client's property in
the courts of other jurisdictions.
CLIENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY OF ANY
ACTION OR PROCEEDING ASSERTING ANY CAUSE OF ACTION, CLAIM, THIRD PARTY
CLAIM OR COUNTERCLAIM (COLLECTIVELY, "CLAIMS") ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER AGREEMENT, OR THE COLLATERAL.
THIS WAIVER EXTENDS TO ALL SUCH CLAIMS, INCLUDING, WITHOUT LIMITATION,
CLAIMS WHICH INVOLVE PERSONS OR ENTITIES OTHER THAN FTC COMMERCIAL
CORP., CLAIMS WHICH ARISE OUT OF OR ARE IN ANY WAY CONNECTED TO THE
RELATIONSHIP BETWEEN FTC COMMERCIAL CORP. AND CLIENT, AND ANY CLAIMS
FOR DAMAGES, BREACH OF CONTRACT, SPECIFIC PERFORMANCE, TORT OR ANY
EQUITABLE OR LEGAL RELIEF OF ANY KIND.
31. SEVERABILITY OF INVALID PROVISIONS, HEADINGS, INTERPRETATIONS OF
AGREEMENT.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
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All headings in this Agreement are inserted for convenience and shall
not be considered part of the Agreement or be used in its interpretation.
All references in this Agreement to the singular shall be deemed to
include the plural when the context so requires, and visa versa. References in
the collective or conjunctive shall also include the disjunctive unless the
context otherwise clearly requires a different interpretation.
32. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All agreements, representations, warranties and covenants made herein
by Client shall survive the execution and delivery of this Agreement and any
bankruptcy proceedings involving Client and shall continue in effect so long as
any obligation to FTC COMMERCIAL CORP. contemplated by this Agreement is
outstanding and unpaid, notwithstanding any termination of this Agreement.
33. ASSIGNABILITY:
This Agreement is not assignable or transferable by Client and any such
purported assignment or transfer is void. This Agreement shall be binding upon
the successors of Client. Client acknowledges and agrees that FTC Commercial
Corp. may assign all or any portion of this Agreement, including, without
limitation, assignment of the rights, benefits and remedies of FTC Commercial
Corp. hereunder without any assignment of the duties, obligations or liabilities
of FTC Commercial Corp. hereunder.
34. INTEGRATED AGREEMENT, AMENDMENT, HEADINGS, GOVERNING LAW:
This Agreement shall replace and supersede any prior agreement between
Client and FTC Commercial Corp. This Agreement and the documents identified or
contemplated herein constitute the entire agreement between FTC Commercial Corp.
and Client as to the subject matter hereof and may not be altered or amended
except by written agreement signed by FTC Commercial Corp. and Client. No
provision hereof may be waived by FTC Commercial Corp. except upon written
waiver executed by FTC Commercial Corp. This Agreement shall be governed by and
construed in accordance with the laws of the State of California and this
Agreement shall be deemed to have been executed by the parties in the State of
California.
Yours very truly,
FTC COMMERCIAL CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxx, President
Accepted this 12th day of October, 2005
XXXXX XXXX, LLC D/B/A/ XXXXXXX XXXX
By: /s/ Xxxxxx Xxxx
---------------------------------------
Authorized Signature
Title: The Majority in Interest Member
Print Name: Xxxxxx Xxxx
-------------------------------
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SCHEDULE A - STRUCTURED CREDIT SURCHARGE LIST
6/01/04
CUSTOMER NAME CUSTOMER #
--------------------------------------------------------------------------------
Broder Brothers 000-000-000 1.0%
--------------------------------------------------------------------------------
Casual Male Retail Group 000-000-000 3.0%
--------------------------------------------------------------------------------
Gadzooks Inc. (DIP) 000-000-000 1.5%
--------------------------------------------------------------------------------
Xxxxxxxxxx'x 000-000-000 3.0%
--------------------------------------------------------------------------------
Xxxxxx Bay 000-000-000
Zellers 000-000-000 1.0%
The Bay 000-000-000
--------------------------------------------------------------------------------
Kmart Holding Corp. 000-000-000 2.5%
--------------------------------------------------------------------------------
Retail Ventures, Inc. 000-000-000
Value City 000-000-000
Filene's Basement 000-000-000 1.0%
Shonac Corporation 000-000-000
DSW Show Warehouse 000-000-000
--------------------------------------------------------------------------------
Rue 21, Inc. 000-000-000 2.0%
--------------------------------------------------------------------------------
United Retail Group 000-000-000 2.0%
--------------------------------------------------------------------------------
ShopKo Stores, Inc. 000-000-000
Pamida 000-000-000 1.0%
--------------------------------------------------------------------------------
INTERFACE, INC. 000-000-000
Chatham Manufacturing 000-000-000
Interface Americas 000-000-000
Interface Fabrics Group South 000-000-000
Interface Fabrics Group 000-000-000
Architectural Flooring, Inc. 000-000-000
Resource Flooring Consultants 000-000-000
Re Source South Florida 000-000-000
Re Source Arizona 000-000-000
Re Source North Carolina 000-000-000
Resource Delaware 000-000-000
Resource New York 000-000-000
Resource Washington 000-000-000
Resource Colorado 000-000-000
Resource New Jersey 000-000-000
Superior Holding 000-000-000 1.0%
Guilford of Maine 000-000-000
Resource Oregon 000-000-000
Resource Florida 000-000-000
Resource Southern California 000-000-000
Resource Georgia 000-000-000
Southern Contract Systems 000-000-000
Resource Texas 000-000-000
Resource Pennsylvania 000-000-000
Teknit 000-000-000
Toltek 000-000-000
Facilities Resource Group 000-000-000
Mid Atlantic Flooring 000-000-000
Resource Minnesota 000-000-000
Intek 000-000-000
--------------------------------------------------------------------------------
Kmart Holding Corp. 000-000-000 2.5%
--------------------------------------------------------------------------------
ShopKo Stores, Inc. 000-000-000
Pamida 000-000-000 1.0%
--------------------------------------------------------------------------------
INDIVIDUAL CREDIT DECISIONS ARE REQUIRED FOR THE SURCHARGED ACCOUNTS.
CUSTOMER NAMES ON THIS LIST SHOULD NOT BE CONSTRUED
AS ANY SORT OF CREDIT DECISION.
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EXHIBIT A
SERVICES FEES
Special reports prepared $50.00
specifically for Client
Wire transfers $30.00/Domestic
$50.00/International
Placing for collection Accounts $250.00 per account, plus 10% of any
which are at client's risk amounts collected
Minimum Invoice Charge $3.00
Factor Guarantees $150 or 2%, whichever is higher
Initial documentation fee (minimum) $0.00
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