EXHIBIT 10.4
FACTORING AGREEMENT
ALTRES Financial L. P. ("ALTRES"), a Hawaii limited partnership, and
Medical Asset Management, Inc., a Delaware corporation ("Client"), agree as
follows:
1. DEFINITIONS.
a. "Acceptable account" shall mean an account of Client conforming to
the representations, warranties, and requirements of this Agreement.
b. "Account" shall mean any and all accounts as defined in the Uniform
Commercial Code, accounts receivable, amounts owing to Client under
any rental agreement or lease, payments on construction contracts,
promissory notes or on any other indebtedness, any rights to payment
customarily or for accounting purposes classified as accounts
receivable, and all rights to payment, proceeds or distributions
under any contract, of Client, presently existing or hereafter
created, and all proceeds thereof.
c. "Account debtor" shall mean any account debtor obligated for payment
of any account.
d. "Account debtor dispute" shall refer to any delay or failure of an
account debtor to timely pay an account or any portion of an account
for any reason which is not solely a credit problem, including,
without limitation, any dispute or claim against Client (whether or
not relating to the goods or services sold giving rise to the
account), whether or not valid, setoff, deduction, or any other
alleged defense or counterclaim. An account subject to both a credit
problem and an account debtor dispute shall be treated as subject
only to an account debtor dispute.
e. "Advance" or "Advances" shall mean an advance described in Xxxxxxxxx
0, XXXXXXXX PRICE OF ACCOUNTS, below.
f. "Chargeback" refers to the procedure whereby a Client purchases an
account back from ALTRES pursuant to the recourse or limited
recourse obligations of Client under this Agreement or pursuant to
any other provision of this Agreement.
g. "Collateral" refers collectively to the following, and to any other
collateral or security or the obligations of Client under this
Agreement:
(1) All inventory as defined in the Uniform Commercial Code,
wherever located, all goods, merchandise or other personal
property held for sale or lease, names or marks affixed
thereto for purposes of selling or identifying the same or the
seller or manufacturer thereof and all related rights, title
and interest all raw materials, work or goods in process or
materials or supplies of every nature used, consumed or to be
used in Client's business, all packaging and shipping
materials, and all other goods customarily or for accounting
purposes classified as inventory, of Client's now owned or
hereafter acquired or created, all proceeds and products of
the foregoing
and all additions and accessions to, replacements of,
insurance or condemnation proceeds of, and documents covering
any of the foregoing, all property received wholly or
partially in trade or exchange for 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.
(2) All accounts (as defined in Subparagraph "b", above).
(3) Any and all general intangibles of Client, presently existing
or hereafter arising, including general intangibles as defined
in the Uniform Commercial Code, chooses in action, proceeds,
contracts, distributions, dividends, 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.
(4) All balances, reserves, deposits, debts or any other amounts
or obligations of ALTRES 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.
(5) 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 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").
h. "Credit problem" shall refer to any delay or failure of an account
debtor to timely pay an account or any portion of an account due
solely to financial, cash flow or credit problems of the account
debtor.
i. "Discount" shall mean the discount described in Xxxxxxxxx 0,
XXXXXXXX PRICE OF ACCOUNTS, below.
j. "Event of Default" shall mean an event of default as defined in
Paragraph 25, DEFAULT AND REMEDIES, below.
k. "Person" shall mean an individual, corporation, partnership, trust,
or any other legal entity.
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l. "Rebate" shall mean the rebate described in Xxxxxxxxx 0, XXXXXXXX
PRICE OF ACCOUNTS, below.
m. "Reserve" shall mean the Reserve described in Paragraph 5, RESERVE
FOR SECURITY, below.
2. FACTORING OF ACCOUNTS.
ALTRES may purchase from Client such acceptable accounts as Client may
submit to ALTRES, subject to the terms and conditions of this agreement.
The obligation of ALTRES to purchase accounts from Client is discretionary
and ALTRES shall have no obligation to purchase any account from Client,
notwithstanding anything to the contrary in this Agreement. ALTRES may
decline to purchase any account submitted by Client for any reason or for
no reason, without notice, regardless of any course of conduct or past
purchases of accounts by ALTRES.
ALTRES shall be the sole and exclusive factor for Clients accounts. Client
will not factor or otherwise finance its accounts receivable except with
ALTRES.
Notwithstanding anything to the contrary in this Agreement, the purchase
of accounts by ALTRES shall be deemed to be a true purchase with transfer
of title and shall not be deemed to be a loan arrangement or secured
transaction, except to the extent that a true purchase of accounts is
subject to laws relating to secured transactions.
3. PURCHASE PRICE OF ACCOUNTS.
An advance shall be the amount paid to Client by ALTRES upon the initial
purchase of an acceptable account. The amount of the advance shall be the
face amount of each account less the discount. The discount shall be FORTY
PERCENT (40%) of the face amount of each account. The amount of the
discount may be adjusted by ALTRES at any time. The discount will be
indicated on the factoring xxxx of sale.
Client shall be entitled to a rebate on the discount determined as
follows:
Discount
-Base Commission
-Total Daily Funds Charges
--------------------------
Rebate
The base commission shall be calculated at a rate of ONE PERCENT (1.0%) of
the face amount of each account for each THIRTY (30) day period, or part
thereof, until payment of the account is received by ALTRES.
The total daily funds charges will be determined as follows:
Daily Funds Rate
X Advance Amount
------------------
Daily Funds Charge
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Daily Funds Charge
X Days Outstanding
------------------
Total Daily Funds Charges
The daily funds rate shall be the prime rate as announced in the Wall
Street Journal plus TWO PERCENT (2.0%) divided by 360. The prime rate
shall be adjusted and initially determined in accordance with the
following provision:
At the option of ALTRES, the prime rate may be adjusted from time to
time as of the date of any change in the prime rate. The initial
prime rate shall be the prime rate in effect under this formula on
the date of this Factoring Agreement.
The days outstanding shall be the number of days from purchase of the
account by ALTRES until payment in full is received by ALTRES.
The amount of the discount and rebate are based upon a minimum volume of
ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($1,250,000.00) of accounts
of Client sold to ALTRES each month. If this minimum volume is not met in
any month, ALTRES will charge additional fees to be deducted from the
Client's Reserve account. The additional fees will be calculated by
subtracting the minimum volume from the total of the face value of
accounts sold to ALTRES for the monthly period and multiplying the result
by TWO PERCENT (2.0%). Client and ALTRES further agree that the minimum
term of this agreement is for NINETY (90) days. Notwithstanding a
cancellation of this agreement by Client, ALTRES will be entitled to
collect a cancellation fee from the Client based upon the minimum volume
requirement set forth above. At no time will the total purchased
outstanding balance exceed ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS
($1,250,000.00). An application fee of Two Thousand Five Hundred Dollars
($2,500.00) shall be payable upon signing the proposal to factor. An
origination fee of Seven Thousand Five Hundred Dollars ($7,500.00) shall
be payable upon signing the proposal to factor.
4. PAYMENT OF PURCHASE PRICE AND REBATE.
Payment to Client for accounts factored to ALTRES will be available within
three (3) business days of the date the account and all other required
documentation is received by ALTRES. Any rebate owing to Client by ALTRES
will be paid after the weekly collection cycle or at such other intervals
as may be determined by ALTRES.
Payment shall be made in accordance with any written instructions of
Client which are agreed to by ALTRES. Absent other instructions, payment
shall be made by the mailing of a check to Client.
5. RESERVE FOR SECURITY.
As security for the payment of recourse obligations and performance of all
obligations of Client hereunder, ALTRES may withhold a reserve (the
"Reserve") from amounts owing to Client by ALTRES. The amount of the
Reserve shall be determined in accordance with the following provision:
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FIVE PERCENT (5.0%) of the outstanding balance owing on accounts
factored to ALTRES, calculated at such intervals as are determined
by ALTRES, but in no event less than ONE THOUSAND DOLLARS
($1,000.00).
The Reserve may be funded by ALTRES withholding amounts owing to Client
for advances or for rebates or, upon request of ALTRES, Client will from
time to time pay ALTRES an amount sufficient to fund the Reserve.
In the sole discretion of ALTRES, the amount of the Reserve may be
adjusted at any time.
ALTRES may, at any time and from time to time, regardless of whether the
obligation is delinquent, setoff end apply all or any part of the Reserve
to any obligation of Client owing to ALTRES. Upon doing so, ALTRES may
fund the resulting deficiency in the Reserve by again withholding payments
owing to Client as provided in this paragraph.
Upon termination of the right of Client to submit accounts to ALTRES as
provided in Paragraph 16 TERMINATION OF FACTORING, any balance of the
Reserve shall be due and owing and paid to Client upon completion of the
following conditions: (i) all amounts owing to ALTRES by Client pursuant
to this Agreement or otherwise have been paid in full; and (2) Ninety-one
(91) days have elapsed since such termination.
ALTRES shall be free to use the Reserve as working capital or as ALTRES
otherwise determines. ALTRES shall have no obligation to segregate, not
commingle or otherwise account for the use of the Reserve. Client shall
not be entitled to any interest on the Reserve. The Reserve shall be a
debt owed to Client by ALTRES, payable in accordance with the terms and
conditions of this Agreement.
6. RECOURSE AND LIMITED RECOURSE PURCHASES.
At the time of purchase of each account, ALTRES shall designate whether
the purchase is recourse or limited recourse to Client. Determination of
whether the account is recourse or limited recourse shall be made solely
by ALTRES in its discretion.
Except as otherwise provided in this Agreement, an account purchased with
limited recourse will be subject to chargeback only in the event the
limited recourse account is determined by ALTRES to not have been an
acceptable account at the time of purchase by ALTRES, or in the event
ALTRES is unable to collect any limited recourse account or portion
thereof due to an account debtor dispute.
A recourse account shall be subject to chargeback if not paid in full
within ninety (90) days of the date on the face of the invoice.
Client agrees to purchase any and all chargeback accounts, or the
uncollected portion thereof, from ALTRES upon demand. The purchase pace to
be paid by the Client for a chargeback shall be the face amount of the
account, less any collections received on the account by ALTRES. Any
waiver or extension by ALTRES of the right to demand that Client purchase
any chargeback accounts shall not constitute a waiver or extension to any
other accounts and such waiver or extension may be revoked at any time
without notice.
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7. CREDIT INSURANCE.
ALTRES may, but is not obligated to, obtain an umbrella credit insurance
policy for factored accounts receivable. The umbrella policy will provide
coverage for certain losses due to insolvency (as defined in the policy).
ALTRES may elect to place coverage under the policy on any accounts
factored pursuant to this Factoring Agreement and or require the Client to
purchase coverage under the policy when any account represents Twenty Five
percent (25%) of the total outstanding factored accounts. Client may also
elect, by written notice to ALTRES, to place coverage under the policy on
any accounts factored pursuant to this Factoring Agreement. Placement of
coverage shall be subject to the policy being in effect, coverage being
available under the terms and conditions and dollar limitations of the
policy, and any required approval of the insurer.
Client shall pay ALTRES a fee in an amount equal to five-tenths percent
(.5%) of the face amount of each invoice for which coverage under the
policy is placed. This fee is payable upon demand and may be deducted from
amounts owing to Client by ALTRES.
Credit insurance coverage shall be subject to all terms and conditions of
the policy. No obligations of Client under this Factoring Agreement shall
be excused or deferred based upon insurance coverage or any pending claim
under the policy. Upon payment of any claim under the policy to ALTRES,
ALTRES shall, in its discretion, pay the payment to Client as
reimbursement for corresponding chargeback obligations creating the claim
that Client has paid to ALTRES, apply the payment to other obligations of
Client to ALTRES, or add the payment to the Reserve.
8. Chargeback Procedure.
Upon an account becoming eligible for chargeback, chargeback shall be
deemed to have automatically taken place at that time. ALTRES may then (i)
setoff such chargeback against any amount then or thereafter owing by
ALTRES to Client, including, without limitation, payments for the purchase
of accounts; (ii) notify Client that chargeback has been made, identifying
the subject accounts, whereupon Client shall promptly purchase such
accounts and pay the amount owing to ALTRES, (iii) ALTRES may debit the
Reserve, or (iv) ALTRES may exercise any combination of the alternatives
set forth in this paragraph as to any account or group of accounts.
9. COLLECTION PROCEDURES.
a. ALTRES shall have the exclusive right to collect accounts and
receive payments thereon. Client shall not xxxx for, submit any
invoice, or otherwise attempt to collect any factored account except
as authorized in writing by ALTRES.
b. Client agrees to pay all reasonable handling and out of pocket costs
incurred by ALTRES in collection of the accounts of Client,
including, without limitation, postage, photocopy charges, and long
distance phone expenses. Payment of such costs shall be due upon
request. ALTRES may deduct such costs from amounts owing to Client
and may debit the Reserve for such costs.
c. Client shall promptly and completely respond to all requests from
ALTRES for any information or records requested to assist in
collection of factored accounts.
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If Client fails to respond to any request within five (5) days,
ALTRES may treat the account as a chargeback.
d. Client may authorize ALTRES to revise the amount of or otherwise
modify an outstanding account. ALTRES shall have no obligation to
advise the account debtor of such revision except to send the
account debtor any revised invoice which may be provided to ALTRES
by Client. In the event such revision results in a reduction in the
amount owing on such account, such reduced amount may be treated as
a chargeback.
e. In the event an account debtor makes payment to Client on an account
which has been purchased by ALTRES, Client shall immediately deliver
the payment to ALTRES. If payment is made in cash, such payment
shall be immediately delivered to ALTRES. If payment is made by
check or similar instrument, such instrument shall be immediately
delivered to ALTRES in the form received without negotiation. Upon
inquiry from the account debtor or upon request of ALTRES, Client
shall notify the account debtor to make payment directly to ALTRES.
Any payments received by Client on accounts purchased by ALTRES
shall be held in trust by Client for ALTRES.
If any payment received by Client on an account which has been
purchased by ALTRES is deposited or negotiated by Client, or if
Client fails to tender the payment to ALTRES within five (5)
business days of receipt by Client, Client shall promptly pay ALTRES
an amount equal to ten percent ( 10%) of the payment, not as a
penalty but as liquidated damages, to compensate ALTRES for
additional administrative and collection expenses, interest costs
and other damages resulting from such action. Client acknowledges
and agrees that it would be very difficult or impossible to
calculate such damages and that ten percent (10%) of the payment is
a fair estimation of those damages.
Upon failure by Client to immediately deliver any such payment or
ten percent ( 10%) fee to ALTRES, ALTRES may treat the amount of
such payment and fee as a chargeback. The duty of Client to
immediately deliver any such payment and to pay any such fee to
ALTRES shall terminate only when such chargeback is paid.
Client acknowledges and agrees that it has no right, title or
interest whatsoever in the funds constituting payment of an account
purchased by ALTRES, that said funds are the sole and exclusive
property of ALTRES, and that any use of or interference with said
funds by Client will result in civil and criminal liability.
f. Client shall immediately notify ALTRES of any account debtor dispute
concerning an account purchased by ALTRES and of any bankruptcy
filing, lien, garnishment or other legal action concerning such
accounts.
g. ALTRES shall make a good faith, commercially reasonable effort to
collect the factored accounts. It is agreed that collection of
accounts in a commercially reasonable manner does not require, and
ALTRES shall have no obligation to,
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commence any legal action, including the sending of an attorney's
demand letter, to collect any account. Client hereby waives and
releases any and all claims relating to or arising out of any act or
omission by ALTRES in the collection of the factored accounts, gross
negligence and intentional misconduct excepted.
h. Upon request of ALTRES, Client will cause all payments on all
accounts of Client, whether or not factored to ALTRES, to be sent
directly to such address as may be designated by ALTRES. ALTRES is
authorized to receive and open all such payments and retain such
payments which are owing to ALTRES.
i. Upon request of ALTRES, Client will tender to ALTRES all payments
received by Client from an account debtor on accounts created after
Client begins factoring any accounts of that account debtor to
ALTRES, whether or not those accounts are factored to ALTRES. Upon
such request being made, all such payments received by Client shall
be the sole and exclusive property of ALTRES and shall be held in
trust by Client for ALTRES. All such payments shall be applied on
obligations of that account debtor to ALTRES.
j. In the event ALTRES receives any payment from an account debtor on
an account which has not been factored to ALTRES, ALTRES may,
subject to any rights of the account debtor, apply such payment to
any other obligation of Client owing to ALTRES, including, without
limitation, funding of any deficiency in the Reserve.
10. ACCEPTABLE ACCOUNTS.
ALTRES will purchase only acceptable accounts. An acceptable account must
meet all of the following requirements and conditions:
a. The account shall be evidenced by an invoice submitted to ALTRES in
duplicate meeting the following conditions:
(1) Contain the Client name, invoice number, and date;
(2) Contain the full and complete name and address of the account
debtor;
(3) Clearly set forth the amount owing and to be collected by
ALTRES;
(4) State the due date and any other terms for payment of the
account;
(5) Be completely legible;
(6) Be stamped with a notice, in a form acceptable to ALTRES,
stating that the account has been purchased by ALTRES and is
payable to ALTRES; and
(7) Be accompanied by such other documents as are required by
ALTRES.
b. The account shall be submitted to ALTRES within seven (7) business
days of the date the goods are sold or services performed giving
rise to the account are completed, except as otherwise approved in
writing by ALTRES.
c. The invoice shall be accompanied by proof of delivery of goods or
performance of services acceptable to ALTRES.
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d. The account shall meet and comply with the following conditions:
(1) Client has sole and unconditional good title to the account,
the account and any goods sold to create the account being
free from any other security interest, assignment, lien or
other encumbrance of any type;
(2) The account is a bona fide obligation of the account debtor
for the amount identified on the account and there have been
no payments, deductions, credits, payment terms, or other
modifications or reductions in the amount owing on such
account except as set forth on the face of the invoice;
(3) To the best knowledge of Client, there are no defenses or
setoffs to payment of the account which can be asserted by way
of defense or counterclaim against Client or ALTRES;
(4) To the best knowledge of Client, the account will be timely
paid in full by the account debtor;
(5) Any services performed or goods sold which give rise to the
account have been rendered or sold in compliance with all
applicable laws, ordinances, rules and regulations and were
performed or sold in the ordinary course of Client's business;
(6) There have been no extensions, modifications, or other
agreements relating to payment of such account except as shown
upon the face of the invoice;
(7) The account debtor is located or authorized to do business
within the United States; and
(8) No proceeding has been commenced or petition filed under any
bankruptcy or insolvency law by or against the account debtor;
no receiver, trustee or custodian has been appointed for any
part of the property of the account debtor; and no property of
the account debtor has been assigned for the benefit of
creditors.
11. GRANT OF SECURITY INTEREST.
Client hereby grants ALTRES a security interest in the Collateral. The
Collateral shall secure all obligations of Client to ALTRES arising under
or relating to this Agreement and all other obligations of Client to
ALTRES which recite that they are secured by the Collateral.
Clients obligations under this Agreement may also be secured by other
collateral as may be evidenced by other documentation apart from this
Agreement.
Client and ALTRES acknowledge that all security interests and liens
contemplated herein are given as a contemporaneous exchange for new value
to Client, regardless of when advances under this Agreement are actually
made.
12. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CLIENT.
Client represents, warrants and covenants that:
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a. All accounts sold to ALTRES are acceptable accounts;
b. Client has been duly organized or incorporated, as the case may be,
and is in good standing, under the laws of the state of its
organization or incorporation;
c. The place of business of Client, or, if Client has more than one
place of business, the location of its chief executive office, is in
the CITY OF MESA, COUNTY OF MARICOPA, STATE OF ARIZONA, and will not
be moved therefrom without at least thirty (30) days prior written
notice to ALTRES;
d. All records of Client pertaining to accounts sold to ALTRES shall be
kept and stored in the CITY OF MESA, COUNTY OF MARICOPA, STATE OF
ARIZONA, and will not be moved therefrom without at least thirty
(30) days prior written notice to ALTRES;
e. The Equipment will be located in the STATE OF ARIZONA, other than
temporary (not to exceed three months) uses outside that state in
the ordinary course of Client's business, will not be removed from
that state without the prior written consent of ALTRES;
f. Client shall keep the Equipment in good repair and be responsible
for any loss or damage to the Equipment. Client shall pay when due
all taxes, license fees and other charges on the Equipment. Client
shall not sell, misuse, conceal, or in any way dispose of the
Equipment or permit it to be used unlawfully or for hire or contrary
to the provisions of any insurance coverage. Risk of loss of the
Equipment shall be on Client at all times unless ALTRES takes
possession of the Equipment. Loss of or damage to the Equipment or
any part thereof shall not release Client from any of the
obligations secured by the Equipment. ALTRES or its representatives
may, at any time and from time to time, enter any premises where the
Equipment is located and inspect, audit and check the Equipment;
g. Client agrees to insure the Equipment, at Client's expense, against
loss, damage, theft, and such other risks as ALTRES may request to
the full insurable value thereof with insurance companies and
polices satisfactory to ALTRES. Proceeds from such insurance shall
be payable to ALTRES as its interest may appear and such policies
shall provide for a minimum ten days written cancellation notice to
ALTRES. Upon request, policies or certificates attesting to such
coverage shall be delivered to ALTRES. Insurance proceeds may be
applied by ALTRES toward payment of any obligation secured by this
agreement, whether or not due, in such order of application as
ALTRES may elect;
h. Client is duly qualified to do business in each jurisdiction where
the conduct of its business requires such qualification;
i. Client has all necessary licenses and other certificates or permits
required for the conduct of its business and all such necessary
licenses and other certificates or permits are current and will be
maintained at all times;
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j. Client has and shall maintain the full power and authority to
conduct the business in which it engages and to enter into and
perform its obligations under this Agreement;
k. The execution, delivery and performance by Client of this Agreement
have been duly authorized by all necessary action on the part of
Client, and are not inconsistent with any Articles of Incorporation,
By-Laws, Articles of Partnership, or other organizational document
of Client, do not and will not contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or
other instrument to which Client is a party or by which it is bound,
and upon execution and delivery hereof, this Agreement will
constitute a legal, valid and binding agreement and obligation of
Client, enforceable in accordance with its terms;
l. All financial statements of Client, and of any guarantor of Client's
obligations under this Agreement, have been prepared in accordance
with generally accepted accounting principles and fairly present the
financial condition of Client and any such guarantor as of the date
thereof and the results of operations for the period or periods
covered thereby. Since the date of such financial statements there
has been no material, adverse change in the financial condition of
Client or any such guarantor. Client agrees to submit financial
statements for Client to ALTRES and Client shall cause any such
guarantor to submit financial statements for such guarantor to
ALTRES as may be requested by ALTRES, all such financial statements
to be prepared in accordance with generally accepted accounting
principles and to be in a form and from a firm acceptable to ALTRES;
m. Client shall conduct its business in a lawful manner and in
compliance with all applicable federal state, and local laws,
ordinances, rules, regulations, and orders and shall pay when due
all lawfully imposed taxes upon its property, business and income;
n. Client will at all times keep accurate and complete records relating
to its accounts. Client shall not show factored accounts as an asset
on its financial statements. ALTRES and its representatives shall
have the right at any reasonable time to enter any premises where
any such records are located to inspect, audit, check, copy and make
extracts from any records or other data relating to said accounts or
to any other transactions between ALTRES and Client;
o. This Agreement, the financial statements referred to herein, and all
other statements furnished by Client to ALTRES in connection
herewith contain no untrue statement of a material fact and omit no
material fact necessary to make the statements contained therein or
herein not misleading. Client represents and warrants that it has
not failed to disclose in writing to ALTRES any fact that materially
and adversely affects, or is reasonably likely to materially and
adversely affect, Client's business, operations, properties,
prospects, profits, condition (financial or otherwise), or ability
to perform this Agreement; and
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p. Client agrees to execute any financing statements, notices of
assignment, and other documents reasonably requested by ALOES for
perfection or enforcement of the rights and interests of ALTRES, and
to give good faith, diligent cooperation to ALTRES, and to perform
such other acts reasonably requested by ALTRES for perfection and
enforcement of the rights and interests of ALTRES. ALTRES is
authorized to file, record, or otherwise utilize such documents as
it sees fit.
13. REPRESENTATIONS, WARRANTIES AND COVENANTS CONCERNING COLLATERAL.
Client represents, warrants, and covenants concerning the Collateral as
follows:
a. Client has sole and unconditional good title to the Collateral, the
Collateral being free from any other security interest, assignment,
lien or other encumbrance of any type, except as has been previously
disclosed to ALTRES; and
b. The Collateral will be kept free from any other security interest,
assignment, lien or other encumbrance of any type, except as
consented to in writing by ALTRES.
c. Client agrees to insure the Collateral, at Client's expense, against
loss, damage, theft, and such other risks as ALTRES may request to
the full insurable value thereof with insurance companies and
policies satisfactory to ALTRES. Proceeds from such insurance shall
be payable to ALTRES as its interests may appear and such policies
shall provide for a minimum ten days written cancellation notice to
ALTRES. Upon request, policies or certificates attesting to such
coverage shall be delivered to ALTRES. Insurance proceeds may be
applied by ALTRES toward payment of any obligation secured by the
Collateral, whether or not due, in such order of application as
ALTRES may elect.
14. ASSIGNMENT OF RIGHTS CONCERNING COLLATERAL.
Client hereby assigns to ALTRES all of its interest in and rights to any
inventory or other goods giving rise to the accounts factored to ALTRES
which may be returned by account debtors, all rights as an unpaid vendor
or lienor, all rights of stoppage in transit, replevin and reclamation
relating thereto, all rights in and to all security therefor and
guarantees thereof, all rights against third parties with respect thereto,
and all rights under the Uniform Commercial Code and any other law,
statute, regulation or agreement. Any goods so recovered or returned shall
be set aside, marked with the name of ALTRES, and held for the account of
ALTRES. Client will promptly notify ALTRES of all such returned or
recovered inventory or other goods.
Upon request, Client shall deliver such inventory or other goods to
ALTRES. ALTRES may take possession of such inventory or other goods and
resell such inventory or other goods. Client shall pay all reasonable
costs and expenses incurred in taking possession and selling such
inventory and other goods, including, without limitation, reasonable
attorneys fees and legal expenses, transportation expenses, storage
expenses, insurance, and sales commissions. Such reasonable costs and
expenses may be treated as a chargeback. All proceeds from such resale
shall be retained by ALTRES and the net proceeds credited against the
obligations of Client.
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15. ADJUSTMENTS UPON REFUND OF COLLECTIONS.
In the event ALTRES is required to refund or pay back any collection
received on any factored account for any reason other than a credit
problem concerning a limited recourse account, Client shall promptly
reimburse ALTRES for such amount. Such reimbursement may be treated as a
chargeback.
16. TERMINATION OF FACTORING.
The right of Client to submit accounts to ALTRES for factoring shall
remain in force and effect until terminated by either party hereto by
giving Three (3) days written notice of such termination. Upon the
effective date of such notice, Client and ALTRES shall be excused from the
covenants of the second paragraph of Paragraph 2 FACTORING OF ACCOUNTS
providing that ALTRES shall be the sole and exclusive factor for Client's
accounts.
Upon such termination or in the event an Event of Default terminates the
right of Client to submit accounts to ALTRES, at the election of ALTRES
all outstanding, recourse accounts factored to ALTRES may be immediately
subject to chargeback.
In the event Client elects to terminate its right to submit accounts to
ALTRES or an Event of Default terminates the right of Client to submit
accounts to ALTRES within ninety (90) days of the date of this Agreement,
Client shall forfeit to ALTRES twenty-five percent (25%) of the Reserve,
not as a penalty but as liquidated damages to compensate ALTRES for loss
of profits, recovery of expenses, and other damages resulting from such
premature termination. Client acknowledges and agrees 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.
17. RIGHT TO PERFORM FOR CLIENT.
ALTRES may, in its sole discretion, elect to discharge any security
interest, lien or other encumbrance upon any account purchased by ALTRES
from Client, elect to pay any insurance charges payable by Client or
provide insurance as required herein if Client fails to do so. Any such
payments and all expenses incurred in connection therewith shall be
treated as a chargeback. ALTRES shall have no obligation to discharge any
such security interest, lien or other encumbrance or pay such insurance
charges or provide such insurance. In the event Client is indebted to
ALTRES as the account debtor on any account which has been purchased by
ALTRES, ALTRES may treat such debt as a chargeback.
18. POWER OF ATTORNEY TO ENDORSE CHECKS.
Client does hereby make, constitute and appoint ALTRES, and its designees,
as its true and lawful attorneys-in-fact, with full power of substitution,
with full power to endorse the name of Client upon any checks or other
forms of payment on accounts purchased by ALTRES and to effect the deposit
and collection thereof. Such power may be exercised at any time. Client
does hereby make, constitute, and appoint ALTRES, and its designees, as
Client's true and lawful attorneys in fact, with full power of
substitution, such power to be exercised only upon the occurrence of an
Event of Default, to: (a)
13
receive, open, and dispose of all mail addressed to Client; (b) cause mail
relating to accounts of Client sold to ALTRES to be delivered to a
designated address of ALTRES where ALTRES may open all such mail and
remove therefrom any payment of such accounts; (c) ALTRES may settle or
adjust account debtor disputes in respect to said accounts for amounts and
upon such terms as ALTRES, in good faith, deems to be advisable, in such
case crediting Client with only the proceeds received and collected by
ALTRES after deduction of ALTRES' costs, including reasonable attorneys
fees and legal expenses; and (d) ALTRES may do any and all other things
necessary or proper to carry out the intent of this Agreement and to
perfect and protect the rights of ALTRES created under this Agreement.
Exercise of any of the foregoing powers shall be in the sole discretion of
ALTRES without any duty to do so.
19. DISCLOSURE OF INFORMATION.
Client hereby consents to ALTRES disclosing to any financial institution
or investor providing financing for ALTRES, any and all information,
knowledge, reports and records, including, without limitation, financial
statements, concerning Client or any guarantor.
20. INTEREST ON UNPAID CHARGEBACKS.
In the event Client fails to pay any chargeback, Client agrees to pay
interest on the chargeback amount from the date of chargeback until paid,
both before and after judgment, at the rate of eighteen percent (18%) per
annum, unless such rate is in violation of law in which case such interest
rate shall be at the maximum rate allowable by law.
21. SALE OF ALL ACCEPTABLE ACCOUNTS.
Unless otherwise agreed in writing by ALTRES, Client may not sell only a
portion of the accounts for any particular account debtor to ALTRES but
shall offer to sell to ALTRES all acceptable accounts of an account debtor
unless Client elects not to sell any accounts of that account debtor to
ALTRES.
22. COLLECTION OF CHARGEBACK ACCOUNTS.
Until a chargeback has been paid in full, ALTRES shall retain the right to
collect the account(s) giving rise to such chargeback. All out of pocket
expenses, including reasonable attorneys fees and legal expenses, incurred
by ALTRES in seeking collection of such chargeback account(s) shall be
added to the amount due for payment of said chargeback. Client hereby
authorizes ALTRES to initiate any legal action to collect a chargeback
account which is not paid by Client within fifteen (15) days of
chargeback. Client further authorizes ALTRES to settle or compromise any
such chargeback account, in the sole discretion of ALTRES subject only to
acting in good faith, which has not been paid within fifteen (15) days of
chargeback. Any deficiency remaining after such settlement or compromise
shall remain as a chargeback.
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23. NO THIRD PARTY BENEFICIARY.
This Agreement is made for the sole and exclusive benefit of ALTRES and
Client and is not intended to benefit any third party. No such third party
may claim any right or benefit or seek to enforce any term or provision of
this Agreement.
24. INDEMNIFICATION.
Client agrees to indemnify ALTRES for any and all claims, liabilities, and
damages which may be awarded against ALTRES, and for all reasonable
attorneys fees, legal expenses and other expenses incurred in defending
such claims, arising from or relating in any manner to the purchase of
accounts pursuant to the terms of this Agreement, excluding claims based
on the negligence or misconduct of ALTRES. ALTRES shall have sole and
complete control of the defense of any such claims, and is hereby given
authority to settle or otherwise compromise any such claims as ALTRES, in
good faith, determines shall be in its best interests.
25. DEFAULT AND REMEDIES.
Time is of the essence of this agreement. The occurrence of any of the
following events shall constitute a default under this Agreement and be
termed an "Event of Default":
a. Failure by Client to promptly repurchase any account or pay any
chargeback in accordance with the terms of this Agreement;
b. Client fails in the payment or performance of any obligation,
covenant, agreement, or liability created by this Agreement;
c. Any representation, warranty, or financial statement made by or on
behalf of Client in this Agreement, or on behalf of any guarantor of
this Agreement, proves to have been false or materially misleading
when made or furnished;
d. Any default or event which, with the giving of notice or the passage
of time or both, occurs on any indebtedness of Client or any such
guarantor to others;
e. Client or any such guarantor becomes dissolved or terminated, or
experiences a business failure;
f. A receiver, trustee, or custodian is appointed for any part of
Client's or any such guarantor's property, or any part of Client's
or any such guarantor's property is assigned for the benefit of
creditors;
g. Any proceeding is commenced or petition filed under any bankruptcy
or insolvency law by or against Client or any such guarantor;
h. Any judgment is entered against Client or any such guarantor which
may materially affect Client's or any such guarantor's financial
condition;
i. Client or any such guarantor becomes insolvent or unable to pay its
debts as they mature; or
j. The accounts purchased by ALTRES from Client become, for any reason
whatsoever, substantially delinquent or uncollectible.
15
Waiver of any Event of Default shall not constitute a waiver of any
subsequent Event of Default. Upon the occurrence of any event of Default
and at any time thereafter, at the election of Altres and without notice
of such election, Altres may terminate the right of Client or factor
accounts to Altres and all obligations of Client to Altres shall become
immediately due and payable. At the election of Altres, all outstanding
recourse accounts purchased from Client may be immediately subject to
chargeback. Altres shall have the right to enter upon any premises where
the Collateral or records pertaining thereto may be take possession of the
Collateral and records relating thereto or, Client shall, if requested by
Altres, assemble such Collateral and records at a place designated by
Altres. Altres shall have all rights and remedies under the Uniform
Commercial Code. Without notice to Client, Altres may obtain the
appointment of a receiver of the business, property and assets of Client
and Client consents to the appointment of Altres or such person as Altres
may designate as such receiver. Altres may continue to hold the Reserve
for payment of any obligations of Client to Altres then existing or which
may thereafter arise. At any time after the occurrence of an Event of
Default, Altres may, in its desecration, apply the reserve against
obligations of Client owing to Altres. In the event the Reserve is applied
against chargeback shall remain the property of Altres and Altres may
continue to pursue and collect such accounts until all obligations of
Client to Altres then owing or which may thereafter arise have been paid
in full or are otherwise satisfied.
Altres may sell, lease or otherwise dispose of any or all of the
Collateral and, after deducting the reasonable costs and out-pocket
expenses incurred by Altres, including, without limitation, (1) reasonable
attorney fees and legal expenses, (2) transportation and storage costs,
(3) advertising of sale of the Collateral, (4) sale commissions, (5) sales
tax, (6) costs for improving or repairing the Collateral, and (7) costs
for preservation and protection of the Collateral, apply the remainder to
pay, or to hold as a reserve against, the obligations secured by the
Collateral.
26. COSTS OF ESTABLISHING AGREEMENT.
Client agrees to pay to ALTRES, upon demand and submission of a statement
therefor, reasonable legal expenses, attorneys fees, and other out of
pocket expenses of ALTRES relating to the cost of negotiating, preparing
and entering into this Agreement.
27. ATTORNEYS FEES.
In the event of breach or default under the terms of this Agreement, the
breaching or defaulting party agrees to pay all reasonable attorneys fees
and legal expenses incurred by the non-breaching or non-defaulting party
in enforcement of this Agreement, in collecting any damages arising from
such breach or default, or otherwise related to such breach or default.
Client agrees to pay all expenses, including reasonable attorney's fees
and legal expenses, incurred by ALTRES in any bankruptcy proceedings of
any type involving Client or this Agreement, including, without
limitation, expenses incurred in modifying or lifting the automatic stay,
determining adequate protection, use of cash collateral, or relating to
any plan of reorganization.
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28. BANKRUPTCY CONSIDERATIONS.
In addition to any other covenants made herein by Client, Client covenants
that it will notify ALTRES 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 ALTRES 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. ALTRES 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, ALTRES 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 ALTRES to purchase accounts
until such time as the Bankruptcy Court approves the post-petition
financing agreement.
29. ARBITRATION. N/A.
30. 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.
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 He collective or conjunctive shall also include the
disjunctive unless the context otherwise clearly requires a different
interpretation.
31. NOTICES.
All notices hereunder shall be in writing and may be mailed, postage
prepaid, addressed as follows:
To ALTRES:
ALTRES Financial, L. P.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Compliance Officer
17
To Client:
Medical Asset Management, Inc.
00000 Xxxxx xx Xxxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Any notice so mailed shall be deemed given three (3) days after mailing.
Any notice otherwise delivered shall be deemed given when received by the
addressee.
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 ALTRES 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 ALTRES
may assign all or any portion of this Agreement, including, without
limitation, assignment of the rights, benefits and remedies of ALTRES
hereunder without any assignment of the duties, obligations or liabilities
of ALTRES hereunder.
34. INTEGRATED AGREEMENT, AMENDMENT HEADINGS, GOVERNING LAW.
This Agreement shall replace and supersede any prior agreement between
Client and ALTRES.
This Agreement and the documents identified or contemplated herein
constitute the entire agreement between ALTRES and Client as to the
subject matter hereof and may not be altered or amended except by written
agreement signed by ALTRES and Client. No provision hereof may be waived
by ALTRES except upon written waiver executed by ALTRES. This Agreement
shall be governed by and construed in accordance with the laws of the
State of Utah and this Agreement shall be deemed to have been executed by
the parties in the State of Utah.
Dated: October 16, 1997
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MEDICAL ASSET MANAGEMENT, INC.
By: /s/ Xxxx X. Xxxxx
---------------------------------
XXXX X. XXXXX
Title (Its): President
ALTRES Financial, L.P.
By: Xxx Xxxx Associates, a Hawaii
limited partnership, Its General
Partner
By: FOIGP Corp., a Hawaii corporation,
Its General Partner
By: Xxx Xxxx
----------------------------------
Title (its): General Partner
----------------------------
FOR CORPORATE CLIENT:
STATE OF UTAH )
) : ss.
COUNTY OF SALT LAKE )
On the 16th day of October 1997, personally appeared before me XXXX X. XXXXX who
being by me duly sworn did depose and say that he is the PRESIDENT OF MEDICAL
ASSET MANAGEMENT, INC. the Client in the foregoing Agreement and that by and
through its By-laws or by resolution of its Board of Directors, said XXXX X.
XXXXX acknowledged that he/she executed the foregoing Agreement for and on
behalf of MEDICAL ASSET MANAGEMENT, INC.
Xxxxxxx X. Xxxxx
----------------------------------
NOTARY PUBLIC
My Commission Expires: June 26, 1999 Residing At: Salt Lakes
19
Exhibit "A"
ATTACHMENT TO UCC FINANCING STATEMENT
Debtor: MEDICAL ASSET MANAGEMENT, INC.
Secured Party: ALTRES FINANCIAL L. P.
Description of Collateral:
(1) All inventory as defined in the Uniform Commercial Code, wherever
located, all goods, merchandise or other personal property held for sale or
lease, names or marks adduced thereto for purposes of selling or identifying the
same or the seller or manufacturer thereof and all related rights, title and
interest, all raw materials, work or goods in process or materials or supplies
of every nature used, consumed or to be used in Debtor's business, all packaging
and shipping materials, and all other goods customarily or for accounting
purposes classified as inventory, of Debtor, now owned or hereafter acquired or
created, all proceeds and products of the foregoing and all additions and
accessions to replacements of, insurance or condemnation proceeds of, and
documents covering any of the foregoing, all property received wholly or
partially in trade or exchange for 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.
(2) All accounts as defined in the Uniform Commercial Code, accounts
receivable, amounts owing to Debtor under any rental agreement or lease,
payments on construction contracts, promissory notes or on any other
indebtedness, any rights to payment customarily or for accounting purposes
classified as accounts receivable, and all rights to payment, proceeds or
distributions under any contract, of Debtor, presently existing or hereafter
created, and all proceeds thereof.
(3) Any and all general intangibles of Debtor, presently existing or
hereafter arising, including general intangibles as defined in the Uniform
Commercial Code, chooses in action, proceeds, contracts, distributions,
dividends, refunds, security deposits, judgments, insurance claims, any right to
payment of any nature, intellectual property rights or licenses, any other
rights or assets of Debtor customarily or for accounting purposes classified as
general intangibles, and all documentation and supporting information related to
any for the foregoing, and all proceeds thereof
(4) All balances, reserves, deposits, debts or any other amounts or
obligations of Secured Party owing to Debtor, including, without limitation, any
rebates, the Reserve (as defined in the Factoring Agreement between Debtor and
Secured Party), and any other amounts owing pursuant to this Agreement, whether
or not due, now existing or hereafter arising or created, and all proceeds
thereof.
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
debtor, now owned or hereafter acquired or created, all proceeds and products of
the foregoing and 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, encumbrances, collections, or
any other temporary or permanent disposition of any of the foregoing or any
interest therein
(5) Pursuant to any agreement between Debtor and secured party, Debtor has
agreed not to further encumber the collateral described herein.
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