Exhibit 10.11
ACCOUNTS RECEIVABLE FINANCING AGREEMENT
Alliance Financial Capital, Inc. (hereby "AFC"), a California corporation having
its offices at 000 Xxxxxxx Xxxxxxxxx, Xxxxxxxxxx, Xxxxxxxxxx 00000 and SinoFresh
Healthcare, Inc. (hereafter "SELLER") hereby agree as follows:
A. On a transaction-by-transaction basis and at each party's sole and
absolute discretion, AFC hereby agrees to buy SELLER'S accounts
receivable (hereafter "accounts"(on a discoutn4ed basis, including,
without limitation, full power to collect, compromise, xxx for, assign,
or in any manner enforce collection thereof, in the name of AFC, or
otherwise. Each transaction for said purchase and sale of accounts
should be on a daily batch basis, which is (hereafter "BULK") and each
of the said Bulks shall be treated as a separate transaction on AFC's
books and records, which shall be accounted for as between AFC and
SELLER separately and independently from all other such transactions
entered into between AFC and SELLER. Each of said transactions shall be
supported by a Bulk Assignment Schedule, an exemplar of which is
attached hereto and made a part thereof by this reference as Exhibit
"A", executed by SELLER, setting forth the transaction amount, (which
is defined as the total gross face amount of all invoice(s) included in
each transaction), the consideration (hereafter "ADVANCE") paid by AFC
therefore, the contingency reserve, and the discount therefore. Each of
said Bulk Assignment Schedules shall be deemed a separate sale and
assignment of accounts, regardless of the number of invoices listed
therein, and shall incorporate the terms, conditions and provisions of
this agr4eement.
B. AFC shall advance to SELLER toward the purchase of said accounts, the
following percentage of each BULK, less sales tax, so long as SELLER is
not in breach of this agreement: eighty percent (80%), up to the
Account Credit Limit (defined as the maximum amount of accounts
purchased and unpaid at any time, of four million dollars
($4,000,000.00).
C. SELLER makes the following representations, warranties and covenants
with respect to each such transaction, which may be entered into
between AFC and SELLER hereafter.
1. SELLER shall be the sole and absolute owner of said
accounts(s), and shall have the full legal power to make said
sales, assignments and transfers.
2. Said account(s) shall be presently due and owing to SELLER
with terms not to exceed net 45 days, the amounts(s) thereof
shall not be in dispute, the payment of said accounts(s) shall
not be in dispute, or contingent upon the fulfillment of this,
or any other contract(s), past or future, and SELLER shall not
know, or have reason to believe that the account debtor(s) is
unable to remit payment within terms.
3. There shall not be any set-off or counterclaims against said
account(s), and said account(s) shall not have been previously
assigned or encumbered by SELLER in any manner whatsoever.
4. AFC shall have the right to reduce contingencies, (the total
of each Bulk, less ADVANCE and net discount) and to apply
contingencies, as defined hereafter, from any transaction(s)
between the parties by the amount of any dispute(s),
discount(s), return(s), defense(s), or offset(s) taken by any
account debtor(s). If contingencies are inadequate AFC shall
have the right to deduct said amount(s) from any other billing
rights purchased by AFC from SELLER to demand payment of any
other accounts receivable of SELLER, whether or not purchased
by AFC, and/or demand reimbursement from SELLER.
5. Said account(s) shall be the property of and shall be
collected by AFC, but if for any reason any amount(s) thereof
should be paid to SELLER by and of said account debtor's,
SELLER shall immediately deliver all such checks or other
instruments in kind to AFC.
6. AFC shall have the power of endorsement for any purpose on any
and all checks, drafts, money orders, or any other instruments
in AFC's possession and payable to SELLER. SELLER hereby
appoints AFC its agent for said purpose.
7. SELLER shall promptly advise AFC, in writing, if SELLER's
place of business is changed, a new place is added or record
keeping changed.
8. SELLER shall provide to AFC an accounts receivable/ accounts
payable aging report on the first and the fifteenth day of
each month, a current income statement, balance sheet and bank
account(s) statements(s) by the fifteenth day after the end of
each month, a copy of all payroll records the business day
following the disbursal of payroll. Internal Revenue Service
form 941 and a copy of the check used to pay the 941
obligation the business day following the day of delivery to
the Internal Revenue Service and a copy of federal and state
tax returns by June 1 of each calendar year.
9. SELLER will comply with and perform any term, obligation,
covenant, or condition contained in this agreement or in any
other related documents, and will comply with and perform any
term, obligation, covenant or condition contained in any other
agreement between SELLER and AFC.
10. Each warranty, representation, and/or statement of Seller made
or furnished in connection with this agreement shall be true
and correct when made and shall remain true and correct
throughout the term of this agreement.
D. A gross discount of twenty percent (20%) shall be held in a reserve
account (Reserve) by AFC form the collection of each invoice. SELLER
however shall be entitled to a rebate, (gross discount less net
discount), regard each invoice, which shall be deducted form said gross
discount, if such invoice obligations to AFC. The net discount shall be
computed as follows: Price Rage plus two percent (2%) on net funds
employed. This portion of the net discount shall be deducted form the
Reserve on the last day of each calendar month during the term of this
agreement and shall be based on a three hundred and sixty (360) day
year. (For the purpose of this Agreement, the Price Rage is as
published every day in the Wall Street Journal. Should the Prime Rate
be published in more than one section of the Wall Street Journal, the
rate that is highest will be valid. Should the published Prime Rage
change from the previous day, the Prime Rate of this Agreement so shall
change to match the published rate, effected that day.) Additional
discount of on and three quarters percent (1.75%) for the initial
thirty (30) day period, or a part thereof, and six tenths percent (.6%)
for each ten (10) day period thereafter, or part thereof, per invoice
amount. Other Fees: The following fees may be applicable: Redirected
payment fee: If a payment for any purchased invoice is sent by an
account debtor directly to SELLER, a fee equal to fifteen percent (15%)
of the invoice amount shall be deducted by AFC form the reserve account
of SELLER, unless the payment is sent to AFC in its original form,
within three (3) business days. This fee is not a penalty, but is
liquidated damages, to compensate AFC for additional administrative and
collection expenses, interest costs and other damages resulting from
such action. SELLER agrees and acknowledges that fifteen percent (15%)
is a fair estimate of those damages. Payment of such fee shall not
constitute a cure or waiver of any default of other failure by SELLER
to comply with any other terms of this agreement. Facility Fee: one and
fifteen on hundredths percent (1.15%) of the account credit limit, to
be deducted from the initial advance of each term. Minimum Funding Fee:
for each funding request less than five thousand dollars ($5,000) a
charge of two hundred and fifty dollars ($250) will be deducted from
the reserve account of SELLER. Minimum monthly fees as described in the
following paragraph. Quarterly On Site Auditing Fees: as described in
Section X.
X. The term of this agreement shall be for twelve (12) months form the
date of the initial advance with a minimum monthly average net funds
employed balance equal to twenty five percent (25%) of the account
credit limit for each calendar month ($1,000,000). This fee will be
waived for the initial month. If the minimum monthly average net funds
employed balance is not met in any month, AFC will change additional
fees to be deducted from the reserve account. The additional fees will
be calculated by taking the average net funds employed balance in any
calendar month and subtracting it from the minimum monthly average net
funds employed balance as set forth in this agreement. The result, if a
positive number will be multiplied by the net discount calculated by
assuming this amount and the invoices necessary to secure this amount,
was outstanding and accruing fees for each day of the calendar month,
and will be deducted from the Reserve. This term shall renew
automatically in six (6) month increments after the initial term unless
a written request for termination is received by AFC, sent certified
mail, return receipt requested, at least thirty (30) days prior to the
renewal date. Should SELLER request a termination of this agreement at
any time and for any reason, SELLER acknowledges that AFC has the right
to collect minimum monthly fees by assuming that the minim average net
funds employed balance, and the invoices necessary to secure this
amount, was outstanding accruing fees for each month remaining in the
term, not as a penalty, but as liquidated damages to compensate AFC for
loss of profits, recovery of expenses and other damages resulting from
such premature termination. SELLER agrees and acknowledges that it
should be difficult or impossible to calculate such accounts, and that
full payment of the minimum monthly fee for each month in the remainder
of the term is a fair estimate of those damages. For any portion of any
month remaining in the term, the minimum monthly obligation shall be
prorated accordingly. From time to time, Alliance Financial Capital,
Inc. may issue Vendor Assurance Letters to SinoFresh suppliers. The fee
for these letters will be two percent (2%) or the letter amount.
F. All checks received by AFC will be credited on the actual date of
receipt. The collection period regarding each specific invoice, shall
be calculated by counting the days from the date of each ADVANCE
through and including five (5) business days after the date upon which
the total monies collected from said account debtor(s) is equal to or
greater than the sum of the ADVANCE and the net discounting (gross
discount less rebate). AFC shall remit to SELLER its contingency
reserve (all sums collected in excess of a sum equal to the net
discount and advance) regarding each invoice, providing SELLER is not
in default or breach of this agreement.
G. The following shall constitute an Event of Default by Seller under this
agreement. (i) any of the warranties, representations or statements of
Seller are, or become, materially untrue or inaccurate; (2) any
material misrepresentation or nondisclosure on Seller's application for
financing; (3) Seller's insolvency or bankruptcy; (4) the entry of one
or m9ore judgments against Seller which Seller is unable to pay from
funds on hand or retained earnings; (5) the entry of a prejudgment lien
or attachment against Seller's assets. (6) the filing of any tax lien
against Seller which is not discharged within 10 days; (7) violation of
any of Seller's covenants, duties or obligations under this agreement;
(8) a material adverse change in Seller's capitalization, financial
condition, results of operations, or prospects; (9) Seller's collection
or attempted collection of accounts sold to AFC, or other effort to
redirect payment on said accounts, or failure to remit payments
received on said accounts; (10) any interference with AFC's security
interest or efforts to collect on accounts in which AFC has a security
interest; (11) failure to perform any obligation under this agreement,
including failure to provide reports or other information required by
this agreement or reasonably requested by AFC.
H. Upon the occurrence of an Event of Default, SELLER shall pay to AFC a
default fee, which is defined as two percent (2%) per month of the
average outstanding balance (invoice amounts) during the period of
default until such time as AFC, at its sold discretion, declares the
default to be cured. The default fee will be paid as a debit to the
reserve account of SELLER on the last day of each month or on the day
that the default is cured Default fees duce for a portion of a month
will be prorated accordingly. In the event of default by SELLER and/ or
any legal proceedings between SELLER and AFC modify or vacate any
automatic stay or injunction, any petition for the use of cash
collateral or the reorganization of SELLER, AFC shall be entitled to
recover from SELLER its attorney fees and any costs of suit, whether or
not a lawsuit I filed. Seller also agrees to any court costs, in
addition to all other sums provided by law whether or not there is a
law suit. Seller further agrees AFC shall be entitled to recover from
SELLER any fees or charges incurred by AFC in the collecting of an
account for which there has been a breach of any representations,
warranties or covenants as set forth in this agreement , or a partial
or total failure to delay in payment by an account debtor for any
reason, including insolvency, bankruptcy, or the financial inability to
pay, or other actions, including appeals, on behalf of SELLER or AFC.
I. SELLER hereby authorizes AFC, at it sole discretion, and on prior
written notice to SELLER, to set funding limits for each account
debtor. AFC may, in its sole discretion, elect to reduce the advance
percentage of any account debtor as part of its credit evaluation of
the account debtor. AFC shall have the right in it sold discretion,
elect to reduce the advance percentage of any account debtor as part of
its credit evaluation of the account debtor. AFC shall have the right
in its sole discretion after 90 days from the invoice date, or if any
of the representations, warranties or convents are inaccurate, and
reasonable notice to SELLER, to demand payment form SELLER, for any
unpaid invoices sold, assigned and transferred to AFC by SELLER
pursuant to the terms and conditions hereof, or to proceed against
SELLER or against any account debtor(s) for the collection or offset of
any unpaid invoice or amounts due SELLER agrees that in the event an
invoice goes past 90 days of the invoice date, or if any account debtor
asserts at any time any deduction, dispute, contingency, offset, or
counterclaim with respect to any invoice, SELLER shall remuner
