1
Exhibit 10.7.b
AGREEMENT FOR WHOLESALE FINANCING
(SECURITY AGREEMENT - ARBITRATION)
This Agreement for Wholesale Financing ("Agreement") is made as of 11-19, 1993
between ITT Commercial Finance Corp. ("ITT") and Manchester Equipment Co.,
Inc., a / / SOLE PROPRIETORSHIP, / / PARTNERSHIP, /X/ CORPORATION (check
applicable term) ("Dealer"), having a principal place of business located at
00 Xxxxxx Xxxx., Xxxxxxxxx, XX 00000.
1. Subject to the terms of this Agreement, ITT, in its sole discretion, may
extend credit to Dealer from time to time to purchase inventory from ITT
approved vendors. ITT may combine all of ITT's advances to Dealer or on Dealer's
behalf, whether under this Agreement or any other agreement, to make one debt
owed by Dealer. ITT's decision to advance funds on any inventory will not be
binding until the funds are actually advanced. Dealer agrees that ITT may, at
any time and without notice to Dealer, elect not to finance any inventory sold
by particular vendors who are in default of their obligations to ITT, or with
respect to which ITT reasonably feels insecure.
2. Dealer and ITT agree that certain financial terms of any advance made by ITT
under this Agreement, whether regarding finance charges, other fees, maturities,
curtailments or other financial terms, are not set forth herein because such
terms depend, in part, upon the availability from time to time of vendor
discounts or other incentives, prevailing economic conditions, ITT's
floorplanning volume with Dealer and with Dealer's vendors, and other economic
factors which may vary over time. Dealer and ITT further agree that it is
therefore in their mutual best interest to set forth in this Agreement only
the general terms of Dealer's financing arrangement with ITT. Upon agreeing to
finance a particular item of inventory for Dealer, ITT will send Dealer a
Statement of Transaction identifying such inventory and the applicable
financial terms. Unless Dealer notifies ITT in writing of any objection within
fifteen (15) days after a Statement of Transaction is mailed to Dealer: (a) the
amount shown on such Statement of Transaction will be an account stated; (b)
Dealer will have agreed to all rates, charges and other terms shown on such
Statement of Transaction; (c) Dealer will have agreed that the items of
inventory referenced in such Statement of Transaction are being financed by ITT
at Dealer's request; and (d) such Statement of Transaction will be incorporated
herein by reference, will be made a part hereof as if originally set forth
herein, and will constitute an addendum hereto. If Dealer objects to the terms
of any Statement of Transaction, Dealer agrees to pay ITT for such inventory in
accordance with the most recent terms for similar inventory to which Dealer has
not objected (or, if there are no prior terms, at the lesser of 16% per annum
or at the maximum lawful contract rate of interest permitted under applicable
law), but Dealer acknowledges that ITT may then elect to terminate Dealer's
financing program pursuant to Section 12, and cease making additional advances
to Dealer. Any termination for that reason, however, will not accelerate the
maturities of advances previously made, unless Dealer shall otherwise be in
default of this Agreement.
3. To secure payment of all Dealer's current and future debts to ITT, whether
under this Agreement or any current or future guaranty or other agreement,
Dealer grants ITT a security interest in all Dealer's inventory, equipment,
fixtures, accounts, contract rights, chattel paper, instruments, reserves,
documents and general intangibles, whether now owned or hereafter acquired, all
attachments, accessories, accessions, substitutions and replacements thereto
and all proceeds thereof. All such assets are as defined in the Uniform
Commercial Code and referred to herein as the "Collateral." All Collateral
financed by ITT, and all proceeds thereof, will be held in trust by Dealer for
ITT, with such proceeds being payable in accordance with Section 7.
4. Dealer represents that all Collateral will be kept at Dealer's principal
place of business listed above, and, if any, the following other locations.
------------------------------------------------------------------------------
Dealer will give ITT at least 30 days prior written notice of any change in
Dealer's identity, name, form of business organization, ownership, principal
place of business, Collateral locations or other business locations.
5. Dealer will: (a) only exhibit and sell Collateral financed by ITT to buyers
in the ordinary course of business; (b) not rent, lease, demonstrate, transfer
or use any Collateral financed by ITT without ITT's prior written consent; (c)
execute all documents ITT requests to perfect ITT's security interest in the
Collateral; (d) deliver to ITT immediately upon each request, and ITT may
retain, each Certificate of Title or Statement of Origin issued for Collateral
financed by ITT; and (e) immediately provide ITT with copies of Dealer's annual
financial statements upon their completion (which in no event shall exceed 120
days after the end of Dealer's fiscal year), and all other information
regarding Dealer that ITT requests from time to time. All financial information
Dealer delivers to ITT will accurately represent Dealer's financial condition
either as of the date of delivery, or, if different, the date specified
therein, and Dealer acknowledges ITT's reliance thereon.
6. Dealer will: (a) pay all taxes and fees assessed against Dealer or the
Collateral when due; (b) immediately notify ITT of any loss, theft or damage to
any Collateral; (c) keep the Collateral insured for its full insurable value
under a property insurance policy with a company acceptable to ITT, naming ITT
as a loss-payee and containing standard lender's loss payable and termination
provisions; and (d) provide ITT with written evidence of such insurance
coverage and loss-payee and lender's clauses. If Dealer fails to pay any
taxes, fees or other obligations which may impair ITT's interest in the
Collateral, or fails to keep the Collateral insured, ITT may pay such taxes,
fees or obligations and pay the cost to insure the Collateral, and the
amounts paid will be: (i) an additional debt owed by Dealer to ITT; and (ii)
due and payable immediately in full. Dealer grants ITT an irrevocable license
to enter Dealer's business locations during normal business hours without notice
to Dealer to: (A) account for and inspect all Collateral; (B) verify Dealer's
compliance with this Agreement; and (C) examine and copy Dealer's books and
records related to the Collateral.
7. Dealer will immediately pay ITT the principal indebtedness owed ITT on each
item of Collateral financed by ITT (as shown on the Statement of Transaction
identifying such Collateral) on the earliest occurrence of any of the following
events: (a) when such Collateral is lost, stolen or
2
damaged; (b) for Collateral financed under Pay-As-Sold ("PAS") terms (as shown
on the Statement of Transaction identifying such Collateral), when such
Collateral is sold, transferred, rented, leased, otherwise disposed of or
matured; (c) in strict accordance with any curtailment schedule for such
Collateral (as shown on the Statement of Transaction identifying such
Collateral); (d) for Collateral financed under Scheduled Payment Program ("SPP")
terms (as shown on the Statement of Transaction identifying such Collateral), in
strict accordance with the installment payment schedule and (e) when otherwise
required under the terms of any financing program agreed to in writing by the
parties. Regardless of the SPP term pertaining to any Collateral financed by
ITT, if ITT determines that the current outstanding debt owed by Dealer to ITT
exceeds the aggregate wholesale invoice price of such Collateral in Dealer's
possession, Dealer will immediately upon demand pay ITT the difference between
such outstanding debt and the aggregate wholesale invoice price of such
Collateral. If Dealer from time to time is required to make immediate payment to
ITT of any past due obligation discovered during any Collateral audit, or at any
other time, Dealer agrees that acceptance of such payment by ITT shall not be
construed to have waived or amended the terms of its financing program. Dealer
agrees that the proceeds of any Collateral received by Dealer shall be held by
Dealer in trust for ITT's benefit, for application as provided in this
Agreement. Dealer will send all payments to ITT's branch office(s) responsible
for Dealer's account. ITT may apply: (i) payments to reduce finance charges
first and then principal, regardless of Dealer's instructions; and (ii)
principal payments to the oldest (earliest) invoice for Collateral financed by
ITT, but, in any event, all principal payments will first be applied to such
Collateral which is sold, lost, stolen, damaged, rented, leased, or otherwise
disposed of or unaccounted for. Any third party discount, rebate, bonus or
credit granted to Dealer for any Collateral will not reduce the debt Dealer owes
ITT until ITT has received payment therefor in cash. Dealer will: (i) pay ITT
even if any Collateral is defective or fails to conform to any warranties
extended by any third party; (ii) not assert against ITT any claim or defense
Dealer has against any third party; and (iii) indemnify and hold ITT harmless
against all claims and defenses asserted by any buyer of the Collateral relating
to the condition of, or any representations regarding, any of the Collateral.
Dealer waives all rights of offset Dealer may have against ITT.
8. Dealer will pay ITT finance charges on the outstanding principal debt Dealer
owes ITT for each item of Collateral financed by ITT at the rate(s) shown on the
Statement of Transaction identifying such Collateral, unless Dealer objects
thereto as provided in Section 2. The finance charges attributable to the rate
shown on the Statement of Transaction will: (a) be computed based on a 360 day
year; (b) be calculated by multiplying the Daily Charge (as defined below) by
the actual number of days in the applicable billing period; and (c) accrue from
the invoice date of the Collateral identified on such Statement of Transaction
until ITT receives full payment of the principal debt Dealer owes ITT for each
item of such Collateral. The "Daily Charge" is the product of the Daily Rate (as
defined below) multiplied by the Average Daily Balance (as defined below). The
"Daily Rate" is the quotient of the annual rate shown on the Statement of
Transaction divided by 360, or the monthly rate shown on the Statement of
Transaction divided by 30. The "Average Daily Balance" is the quotient of (i)
the sum of the outstanding principal debt owed ITT on each day of a billing
period for each item of Collateral identified on a Statement of Transaction,
divided by (ii) the actual number of days in such billing period. Dealer will
also pay ITT $100 for each check returned unpaid for insufficient funds (an "NSF
check") (such $100 payment repays ITT's estimated administrative costs; it does
not waive the default caused by the NSF check). Dealer acknowledges that ITT
intends to strictly conform to the applicable usury laws governing this
Agreement and understands that Dealer is not obligated to pay any finance
charges billed to Dealer's account exceeding the amount allowed by such usury
laws, and any such excess finance charges Dealer pays will be applied to reduce
Dealer's principal debt owed to ITT. The annual percentage rate of the finance
charges relating to any item of Collateral financed by ITT shall be calculated
from the invoice date of such Collateral, regardless of any period during which
any finance charge subsidy shall be paid or payable by any third party. ITT will
send Dealer a monthly billing statement identifying all charges due on Dealer's
account with ITT. The charges specified on each billing statement will be: (A)
due and payable in full immediately on receipt, and (B) an account stated,
unless ITT receives Dealer's written objection thereto within 15 days after it
is mailed to Dealer. If ITT does not receive, by the 25th day of any given
month, payment of all charges accrued to Dealer's account with ITT during the
immediately preceding month, Dealer will (to the extent allowed by law) pay ITT
a late fee ("Late Fee") equal to the greater of $5 or 5% of the amount of such
finance charges (such Late Fee repays ITT's estimated administrative costs; it
does not waive the default caused by the late payment). ITT may adjust the
billing statement at any time to conform to applicable law and this Agreement.
9. Dealer will be in default under this Agreement if: (a) Dealer breaches any
terms, warranties or representations contained herein, in any Statement of
Transaction to which Dealer has not objected as provided in Section 2, or in
any other agreement between ITT and Dealer; (b) any guarantor of Dealer's debts
to ITT breaches any terms, warranties or representations contained in any
guaranty or other agreement between the guarantor and ITT; (c) any
representation, statement, report or certificate made or delivered by Dealer or
any guarantor to ITT is not accurate when made; (d) Dealer fails to pay any
portion of Dealer's debts to ITT when due and payable hereunder or under any
other agreement between ITT and Dealer; (e) Dealer abandons any Collateral;
(f) Dealer or any guarantor is or becomes in default in the payment of any debt
owed to any third party; (g) a money judgment issues against Dealer or any
guarantor; (h) an attachment, sale or seizure issues or is executed against any
assets of Dealer or of any guarantor; (i) the undersigned dies while Dealer's
business is operated as a sole proprietorship or any general partner dies while
Dealer's business is operated as a general or limited partnership; (j) any
guarantor dies; (k) Dealer or any guarantor shall cease existence as a
corporation, partnership or trust; (l) Dealer or any guarantor ceases or
suspends business; (m) Dealer or any guarantor makes a general assignment for
the benefit of creditors; (n) Dealer or any guarantor becomes insolvent or
voluntarily or involuntarily becomes subject to the Federal Bankruptcy Code,
any state insolvency law or any similar law; (o) any receiver is appointed for
any of Dealer's or any guarantor's assets; (p) any guaranty of Dealer's debts
to ITT is terminated; (q) Dealer loses any franchise, permission, license or
right to sell or deal in any Collateral which ITT finances; (r) Dealer or any
guarantor misrepresents Dealer's or such guarantor's financial condition or
organizational structure; or (s) any of the Collateral becomes subject to any
lien, claim, encumbrance or security interest prior or superior to ITT's. In the
event of a default:
(i) ITT may at any time at ITT's election, without notice or demand to
Dealer, do any one or more of the following: declare all or any part
of the debt Dealer owes ITT immediately due and payable, together with
all costs and expenses of ITT's collection activity, including, without
limitation, all reasonable attorney's fees; exercise any or all rights
under applicable law (including, without limitation, the right to
possess, transfer and dispose of the Collateral); and/or cease
extending any additional credit to Dealer (ITT's right to cease
extending credit shall not be construed to limit the discretionary
nature of this credit facility).
(ii) Dealer will segregate and keep the Collateral in trust for ITT, and in
good order and repair, and will not exhibit, sell, rent, lease, further
encumber, otherwise dispose of or use any Collateral.
3
(iii) Upon ITT's oral or written demand, Dealer will immediately deliver the
Collateral to ITT, in good order and repair, at a place specified by
ITT, together with all related documents, as ITT may, in ITT's sole
discretion and without notice or demand to Dealer, take immediate
possession of the Collateral together with all related documents.
(iv) ITT may, without notice, apply a default finance charge to Dealer's
outstanding principal indebtedness equal to the default rate specified
in Dealer's financing program with ITT, if any, or if there is none so
specified, at the lesser of 3% per annum above the rate in effect
immediately prior to the default, or the highest lawful contract rate
of interest permitted under applicable law.
All ITT's rights and remedies are cumulative. ITT's failure to exercise any of
ITT's rights or remedies hereunder will not waive any of ITT's rights or
remedies as to any past, current or future default.
10. Dealer agrees that if ITT conducts a private sale of any Collateral by
requesting bids from 10 or more dealers or distributors in that type of
Collateral, any sale by ITT of such Collateral in bulk or in parcels within 120
days of: (a) ITT's taking possession and control of such Collateral; or (b)
when ITT is otherwise authorized to sell such Collateral; whichever occurs
last, to the bidder submitting the highest cash bid therefor, is a commercially
reasonable sale of such Collateral under the Uniform Commercial Code. Dealer
agrees that the purchase of any Collateral by a vendor, as provided in any
agreement between ITT and the vendor, is a commercially reasonable disposition
and private sale of such Collateral under the Uniform Commercial Code, and no
request for bids shall be required. Dealer further agrees that 7 or more days
prior written notice will be commercially reasonable notice of any public or
private sale (including any sale to a vendor). If ITT disposes of any such
Collateral other than as herein contemplated, the commercial reasonableness of
such disposition will be determined in accordance with the laws of the state
governing this Agreement.
11. Dealer grants ITT an irrevocable power of attorney to: execute or endorse
on Dealer's behalf any checks, financing statements, instruments, Certificates
of Title and Statements of Origin pertaining to the Collateral; supply any
omitted information and correct errors in any documents between ITT and Dealer;
do anything Dealer is obligated to do hereunder; initiate and settle any
insurance claim pertaining to the Collateral; and do anything to preserve and
protect the Collateral and ITT's rights and interest therein. ITT may provide
to any third party any credit, financial or other information on Dealer that
ITT may from time to time possess.
12. Time is of the essence. This Agreement is deemed to have been entered into
at the ITT branch office executing this Agreement. Either party may terminate
this Agreement at any time by written notice received by the other party. If
ITT terminates this Agreement,Dealer agrees that if Dealer: (a) is not in
default hereunder, 30 days prior notice of termination is reasonable and
sufficient (although this provision shall not be construed to mean that shorter
periods may not, in particular circumstances, also be reasonable and
sufficient); or (b) is in default hereunder, no prior notice of termination is
required. Dealer will not be relieved from any obligation to ITT arising out of
ITT's advances or commitments made before the effective termination date of
this Agreement. ITT will retain all of its rights, interests and remedies
hereunder until Dealer has paid all Dealer's debts to ITT. Dealer cannot assign
Dealer's interest in this Agreement without ITT's prior written consent,
although ITT may assign or participate ITT's interest, in whole or in part,
without Dealer's consent. This Agreement will protect and bind ITT's and
Dealer's respective heirs, representatives, successors and assigns. All
agreements or commitments to extend or renew credit or refrain from enforcing
payment of a debt must be in writing. Any oral or other amendment or waiver
claimed to be made to this Agreement that is not evidenced by a written
document executed by ITT and Dealer (except for each Statement of Transaction
that Dealer does not object to in the manner stated in Section 2) will be null,
void and have no force or effect whatsoever. If any provision of this Agreement
or its application is invalid or unenforceable, the remainder of this Agreement
will not be impaired or affected and will remain binding and enforceable. If
Dealer previously executed any security agreement with ITT, this Agreement will
only amend and supplement such agreement. If the terms hereof conflict with the
terms of any such prior security agreement, the terms of this Agreement will
govern. Dealer agrees to pay all of ITT's reasonable attorneys fees and
expenses incurred by ITT in enforcing ITT's rights hereunder.
13. BINDING ARBITRATION. Except as otherwise specified below, all actions,
disputes, claims and controversies under common law, statutory law or in equity
of any type or nature whatsoever (including, without limitation, all torts,
whether regarding negligence, breach of fiduciary duty, restraint of trade,
fraud, conversion, duress, interference, wrongful replevin, wrongful
sequestration, fraud in the inducement, or any other tort, all contract actions,
whether regarding express or implied terms, such as implied covenants of good
faith, fair dealing, and the commercial reasonableness of any Collateral
disposition, or any other contract claim, all claims of deceptive trade
practices or lender liability, and all claims questioning the reasonableness or
lawfulness of any act), whether arising before or after the date of this
Agreement, and whether directly or indirectly relating to: (a) this Agreement
and/or any amendments and addenda hereto, or the breach, invalidity or
termination hereof; (b) any previous or subsequent agreement between ITT and
Dealer; and/or (c) any other relationship, transaction or dealing between ITT
and Dealer (collectively the "Disputes"), will be subject to and resolved by
binding arbitration.
13.1 All arbitration hereunder will be pursuant to either: (a) the Code of
Procedure in effect from time to time ("Code") of the National Arbitration
Forum ("NAF"), currently located at 0000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx,
Xxxxxxxxx 00000; or (b) the Commercial Arbitration Rules ("Rules") in effect
from time to time of the American Arbitration Association ("AAA"), currently
located at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000. The party first
filing any claim for arbitration shall designate which arbitration procedures
are to be applied for all Disputes between Dealer and ITT, although if either
the NAF or AAA is dissolved, the procedures of the remaining arbitration body
must be used. A copy of the Code, Rules and any fee schedule of the NAF or AAA
may be obtained by contacting the NAF or AAA, as applicable. The parties agree
that all arbitrators selected shall be attorneys. The arbitrator(s) will decide
if any inconsistency exists between the Code, or Rules, as applicable, and the
arbitration provisions contained herein. If any such inconsistency exists, the
arbitration provisions contained herein will control and supersede the Code, or
Rules, as applicable. The site of all arbitration participatory hearings will
be in the Division of the Federal Judicial District of ITT's branch office
closest to Dealer. The laws of the State of Massachusetts will govern this
Agreement; provided, however, that the Federal Arbitration Act ("FAA"), to the
extent inconsistent, will supersede the laws of such state and govern. This
Agreement concerns transactions involving commerce among the several states. All
arbitration proceedings, including testimony or evidence at hearings, will be
kept confidential.
4
although any award or order rendered by the arbitrator(s) or director of
arbitration pursuant to the terms of this Agreement may be entered as a
judgment or order and enforced by either party in any state or federal court
having competent jurisdiction.
13.2 Nothing herein will be construed to prevent ITT's or Dealer's use of
bankruptcy, receivership, injunction, repossession, replevin, claim and
delivery, sequestration, seizure, attachment, foreclosure, dation and/or any
other prejudgment or provisional action or remedy relating to any Collateral
for any current or future debt owed by either party to the other. Any such
action or remedy will not waive ITT's or Dealer's right to compel arbitration
of any Dispute. If either Dealer or ITT brings any other action for judicial
relief with respect to any Dispute, the party bringing such action will be
liable for and immediately pay all of the other party's costs and expenses
(including attorneys' fees) incurred to stay or dismiss such action and remove
or refer such Dispute to arbitration. If either Dealer or ITT brings or appeals
an action to vacate or modify an arbitration award and such party does not
prevail, such party will pay all costs and expenses, including attorneys' fees,
incurred by the other party in defending such action.
13.3 Any arbitration proceeding must be instituted: (a) with respect to any
Dispute for the collection of any debt owed by either party to the other,
within two (2) years after the date the last payment was received by the
instituting party; and (b) with respect to any other Dispute, within two (2)
years after the date the incident giving rise thereto occurred, whether or not
any damage was sustained or capable of ascertainment or either party knew of
such incident. Failure to institute an arbitration proceeding within such
period will constitute an absolute bar and waiver to the institution of any
proceeding with respect to such Dispute. Except as otherwise stated herein, all
notices, arbitration claims, responses, requests and documents will be
sufficiently given or served if mailed or delivered: (i) to Dealer at Dealer's
principal place of business specified above; and (ii) to ITT at 0000 Xxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: General Counsel, or such other
address as the parties may specify from time to time in writing. No arbitration
hereunder will include, by consolidation, joinder or otherwise, any third
party, unless such third party agrees to arbitrate pursuant to the arbitration
provisions contained herein and the Code, or Rules, as applicable.
14. If Section 13 of this Agreement or its application is invalid or
unenforceable, any legal proceeding with respect to any Dispute will be tried
in a court of competent jurisdiction by a judge without a jury. Dealer and ITT
waive any right to a jury trial in any such proceeding.
THIS CONTRACT CONTAINS BINDING ARBITRATION AND JURY WAIVER PROVISIONS.
ITT COMMERCIAL FINANCE CORP. MANCHESTER EQUIPMENT CO. INC.
-----------------------------
Dealer's Name
By: /s/ X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxxxx
--------------------------- ---------------------------
Print Name: X. XXXXXXXX Print Name: XXXXX X. XXXXXXXXX
------------------- -------------------
Title: Regional Vice President Title: Pres.
------------------------ ------------------------
ATTEST
/s/ Xxxx X. Xxxxxxx
-------------------------------
(Assistant) Secretary
Print Name: Xxxx X. Xxxxxxx
--------------------
SECRETARY'S CERTIFICATE OF RESOLUTION
I certify that I am the Secretary or Assistant Secretary of the corporation
named below, and that the following completely and accurately sets forth
certain resolutions of the Board of Directors of the corporation adopted at a
special meeting thereof held on due notice (and with shareholder approval, if
required by law), at which meeting there was present a quorum authorized to
transact the business described below, and that the proceedings of the meeting
were in accordance with the certificate of incorporation, charter and by-laws
of the corporation, and that they have not been revoked, annulled or amended in
any manner whatsoever.
Upon motion duly made and seconded, the following resolution was unanimously
adopted after full discussion;
"RESOLVED, That the several officers, directors, and agents of this
corporation, or any one or more of them, are hereby authorized and empowered on
behalf of this corporation: to obtain financing from ITT Commercial Finance
Corp. ("ITT") in such amounts and on such terms as such officers, directors or
agents deem proper, to enter into financing, security, pledge and other
agreements with ITT relating to the terms upon which such financing may be
obtained and security and/or other credit support is to be furnished by this
corporation therefor; from time to time to supplement or amend any such
agreements; and from time to time to pledge, assign, mortgage, grant security
interests, and otherwise transfer, to ITT as collateral security for any
obligations of this corporation to ITT, whenever and however arising, any
assets of this corporation, whether now owned or hereafter acquired; the Board
of Directors hereby ratifying, approving and confirming all that any of said
officers, directors or agents have done or may do with respect to the
foregoing."
IN WITNESS WHEREOF, I have executed and affixed the seal of the corporation on
the date stated below.
Dated: Nov 19 , 1993 /s/ Xxxx X. Xxxxxxx
--------------- -------------------------------
(Assistant) Secretary
(SEAL) MANCHESTER EQUIPMENT CO. INC.
-------------------------------
Corporate Name
