Exhibit 10.5(a)
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PURCHASE AND SECURITY AGREEMENT
THIS PURCHASE AND SECURITY AGREEMENT made this 17th day of April 19,
1997, by and between American Fire Retardant Corporation with its principal
place of business located in Lafayette, Louisiana (hereinafter referred to as
"Seller"), and PRIVATE CAPITAL, INC., with its principal place of business
located in Lafayette, Louisiana (hereinafter referred to as "Purchaser"):
WITNESSETH THAT:
1. Purchase and Sale. For the consideration hereinafter set forth, but
subject to the terms, provisions, covenants, and conditions herein contained,
Seller hereby offers to sell to Purchaser accounts receivable arising out of
sales of merchandise or service made by Seller during the term of this Agreement
(hereinafter referred to as "Account" or "Accounts"), and agrees to sell to
Purchaser those Accounts which Purchaser approves for purchase as hereinafter
provided. Purchaser hereby agrees to purchase all Accounts that it deems
acceptable. Seller may. from time to time, submit orders to Purchaser for credit
approval prior to acceptance by Seller, however, Purchaser shall not be
obligated to purchase any Account arising out of any such order if unacceptable
to Purchaser. A credit investigation shall not be construed as an acceptance of
an Account. Seller shall be free to deal in such manner as it may desire with
any Account not approved for purchase by Purchaser.
2. Accounts Receivable. Except as Purchaser may otherwise agree in writing,
the terms of all Accounts submitted to Purchaser shall not exceed "net 30 days".
After Purchaser purchases an Account hereunder, Seller shall not vary the terms
of sale set forth in the invoice relating to such Account without Purchaser's
written consent. If any such variation in terms is requested by Seller,
Purchaser shall be entitled to receive, as a condition for its approval of such
change. an amount equal to any decrease in the "net amount" of the Account,
which would result from the variation in terms, along with negotiated additional
discounts. The terms "net amount" shall mean the gross amount payable on the
invoice, less all permitted discounts, deductions, and allowances calculated on
the basis of the shortest selling terms provided. The "Seller" shall immediately
notify "Purchaser" in writing of any changes and/or credits issued against any
purchased account.
3. Purchase Price. Purchaser shall purchase an acceptable Account at a
purchase price equal to the net amount of the acceptable Account, less a
discount equal to 8% of the net amount of the acceptable Account. At the time of
purchase of an Account, Purchaser shall remit to Seller the net amount of such
Account, less Purchaser's discount, as provided for above and an amount
necessary for the Reserve Fund hereinafter referred to. As an inducement to
Seller to sell the accounts from which prompt payment can be expected, Purchaser
agrees to rebate to client 2% on each account that is paid to Purchaser within
30 days. Any account that pays after 30 days will be charged the full discount,
as noted above, plus 2 % for any part of a 30 day increment, exceeding 60 days
from the date, an acceptable account is purchased from the "Seller". Any account
purchased by Purchaser from Seller unpaid for a period in excess of ninety (90)
days from the date of said purchase by Purchaser, Seller agrees to pay to
Purchaser additional sums equal to and calculated according to the "Purchase
Price". This rebate shall be paid when the Reserve Fund is due. This rebate
money owing to Seller may be held by Purchaser at Purchaser's sole discretion as
a further security for payment of any and all obligations owing by Seller to
Purchaser.
4. Transfer. Seller hereby sells, transfers, conveys, and assigns to
Purchaser all its right, title, and interest in and to all Accounts accepted by
Purchaser for purchase, together with all guarantees and security therefor, and
all its right, title and interest in the merchandise purchased and represented
by such Accounts (hereinafter referred to as the "Merchandise"), including, all
Seller's rights of stoppage in transit, replevin, and reclamation as an unpaid
Vendor. Seller further transfers, conveys, sells and assigns to Purchaser any
and all rights, liens. privileges and security which Seller has or may have to
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enforce payment of sums due under the account, including without limitation,
vendors privileges, materialmen liens, rights on open account. Seller agrees to
execute and deliver to Purchaser such notices of assignment and other documents
and to make such reasonable entries and markings upon its books and records as
Purchaser may request to better protect the sale and assignment of Accounts
hereunder. Seller hereby authorizes any of its officers and any employee
authorized by its officers to execute and deliver any assignment or document
referred to it this paragraph as noted in the "Signature Authorization Sheet".
5. Reserve Fund. Any and all Accounts shall be purchased with recourse and
rights of charge back against tile Seller as any and all to the financial
inability or failure of customers to pay according to the terms of' the invoice,
and all losses from the financial inability or failure of customers to pay the
Accounts shall be Seller's sole responsibility, Purchaser shall create and
maintain a reserve fund (hereinafter referred to as the "Reserve Fund") out of
payments and credits otherwise to be made or given by Purchaser to Seller, in
the amount of 22% of the then aggregate unpaid gross amount of all Accounts
purchased. Purchaser may charge against the Reserve Fund and/or the Seller
directly for all rights of recourse and obligations which arise under this
Agreement or otherwise. In order to provide for account debtor claims, Purchaser
shall have the rights to revise the amount or the percentage of tile Reserve
Fund to cover such contingencies. In the even( "Purchaser" has no debtor claims
against "Seller", the "Reserves" will normally be paid by "Purchaser" to
"Seller" on the first working day after the 15th and the first working day after
the last day of the month.
6. Security. In order to secure the payment of any indebtedness that may
become due and owing to Purchaser from Seller by reason as a charge back to
Seller of any Account, which obligation or deficiency is not covered by the
Reserve Fund, and to secure the performance of all obligations of Seller and of
each and every representation, covenant, agreement, Seller hereby grants to
Purchaser a security interest in (a) Seller's inventory now owned or hereafter
acquired by way of replacement, substitution, addition, or otherwise) by Seller
located at American Fire Retardant Corporation 000 Xxxxx Xxxx Xxxxxxxxx Xx 00000
and (b) all accounts receivable, deposit accounts with purchaser, equipment,
general intangibles, goods, instruments and chattel piper of Seller now existing
or hereafter arising (hereinafter collectively referred to as the "Collateral"),
and (c) all proceeds of tile Collateral. The Collateral is also given to secure
payment and performance of all debts, obligations, and liabilities of every kind
and character of Seller, now or hereafter existing in favor of Purchaser,
whether such debts, obligations. or liabilities be direct or indirect, primary
or secondary, joint or several, fixed or contingent. Purchaser shall have all
the rights and remedies provided in this Security Agreement and in the Louisiana
Law. as amended (hereinafter referred to as the "Code").
7. Representations and Warranties. Seller hereby represents and warrants to
Purchaser.
a. If Seller is a corporation, it is duly organized and under the
laws of tile incorporation State and is duly qualified and in
good standing in every other State in which it is doing business,
and the execution, delivery and performance of the Agreement are
within its corporate powers, have been duly authorized as
evidenced by the Certificate of Secretary attached hereto as
Exhibit A. Further, Seller is not in contravention of any law or
the powers of its charter, bylaws, or other incorporation papers,
or of any indenture, agreement, or understanding to which Seller
is a party of by which it is bound.
b. Seller has good and clear title to the Accounts that will be sold
to Purchaser hereunder, and such sale will vest absolute
ownership of such Accounts in Purchaser, free of any claims or
liens of third parties.
c. Seller is the full and sole owner of the Collateral and has good
right and authority to grant a security interest to Purchaser in
the Collateral, and there is no presently outstanding lien,
security interest, or encumbrance in or on the Collateral or its
proceeds, and there is no financing statement covering the
Collateral or its proceeds on file in any public office except as
shown in Exhibit B attached hereto.
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d. All balance sheets, earnings statements, and other financial date
which may have been or may hereafter be furnished to Purchaser by
Seller to induce it to enter into this Agreement or otherwise in
connection with it, do or shall fairly represent the financial
condition of Seller as of tile dates stated and the results of
Seller's operations for the period for which the same are
furnished, and all other information, reports, and other papers
and date furnished to Purchaser are or shall be at the time same
are so furnished, accurate and correct in all material respects
and complete insofar as necessary to five Purchaser a true and
accurate knowledge of the subject matter.
e. Each Account assigned and sold to Purchaser shall be based upon a
bonafide sale and actual shipment of the Merchandise or service
performed and Shall be it valid and enforceable obligation of the
customer, with no rights of recoupment, offset or counterclaims
or return of merchandise which could reduce the amount of such
Account.
8. Invoices. Seller agrees to deliver to Purchaser the original and one
copy of customer invoices related to tile Accounts purchased hereunder, together
with evidence of shipment of the Merchandise purchased, along with a written
assignment of the Account. In addition, upon Purchaser's request, Seller agrees
to deliver to Purchaser the original purchase order from each customer. All
invoices shall plainly state on their face that amounts payable thereunder have
been assigned to and are payable to Purchaser at Purchaser's notice address
herein. and billing on such invoices shall constitute an assignment to Purchaser
of the Accounts thereby represented, whether or not it specific assignment is
executed. Purchaser shall mail at Seller's expenses all customer invoices
representing Accounts accepted by Purchaser.
9. Customer Claims. Seller shall immediately notify Purchaser of the
assertion of any customer claim, including any defense, dispute offset or claim
asserted by a customer with respect to an Account or the Merchandise or service.
Purchaser may in its sole discretion settle any customer claim directly with
tile customer involved at the Seller's expenses, upon such terms as Purchaser
may deem advisable. In tile event of any customer claim or breach of any
representations hereunder as to in), Account, Purchaser may reassign to Seller,
without recourse, the unpaid balance of such Account (or any disputed portion
thereof) to the Reserve Fund, or a ( Purchaser's option, Seller shall pay such
amounts to Purchaser upon demand, in the event Purchaser exercises its right to
settle and compromise customer claims, Seller hereby specifically agrees to the
terms, conditions, and provisions of any and all settlements, compromises, and
other agreements, oral or written, entered into by Purchaser on behalf of
Seller. and Purchaser is further specifically vested with a power of attorney to
act in Seller's name. place and stead, tile same its Seller could do in person,
and is authorized hereby to execute all releases, settlements, or compromise
agreements, and receive for and in Seller's name. all money and other property
that Purchaser may received in settlement, release, or compromise of customer
claims. The foregoing is discretionary upon the part of Purchaser, and Seller
shall have no right to demand or require Purchaser's undertaking of the
aforesaid functions.
10. Collections Remittances Received by Seller. Purchaser is hereby given
the right to notify any account debtor to make payment on any account sold to or
securing Purchaser, directly to Purchaser rather than Seller. All remittances
received by Seller on any Account sold to Purchaser shall be held by Seller in
trust for Purchaser, separate and apart from Seller's own properties and funds,
and shall be immediately delivered to Purchaser in the identical form in which
received. In the event any of the Merchandise shall be returned to, or
repossessed by Seller, such Merchandise shall be held by Seller in trust for
Purchaser, separate and apart from Seller's own property and Subject to
Purchaser's direction and control.
11. Seller's. Mail. Seller hereby authorizes Purchaser to the extent
reasonably necessary to protect Purchaser's interest, to receive, open, and
dispose of Seller's mail received at Purchaser's notice address and to endorse
Seller's name to checks payable to Seller which represent payment for the
Merchandise and on the Accounts sold under this Agreement.
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12. Other Security. Notwithstanding any other provisions of this Agreement,
Purchaser shall be entitled at all times before or after the termination of this
Agreement to hold all sums for credit of Seller as security for any and all of
Seller's obligations to Purchaser, however arising, and any amounts which
Purchaser is authorized hereunder to charge to Seller or for which Seller is
obligated to Purchaser may be withheld and deducted by Purchaser at any tune in
Purchaser's sole discretion from any remittances, payments, or credits otherwise
to be made by Purchaser hereunder.
13. Sales Taxes. All taxes and governmental charges imposed with respect to
sales of the Merchandise shall be charged to and paid by Seller.
14. Financial Statements. Seller agrees to furnish Purchaser within twenty
(20) days after the close of each quarter-annual accounting period of Seller, a
profit and loss statement for such period, and a balance sheet as of the close
of such period, both to be prepared and certified by an accountant acceptable to
Purchaser, and shall furnish Purchaser such additional financial information as
Purchaser shall request Purchaser and Purchaser's agents shall have the right,
at all times during normal business hours, after reasonable notice, to examine
and make extracts from all books and records of Seller. Seller shall keep its
books and records in accordance with generally accepted accounting principles,
consistently applied.
15. Default. The term "default" is used in this Agreement shall mean the
occurrence of any of the following events:
a. The failure to Seller punctually and properly to observe, keep,
or perform, any covenant, agreement, or condition herein required
to be observed, kept or performed.
b. The representations and warranties made by Seller in this
Agreement shall prove to be untrue.
c. The failure of Seller to deliver to Purchaser remittances
received by Seller on an Account Sold to Purchaser.
d. Seller becomes insolvent or makes an assignment for the benefit
of creditors.
e. A receiver is appointed for all or substantially all the
properties of Seller or of the Collateral or any part hereof.
f. Seller is adjudicated a bankrupt or request, either by way of
petition or answer, that Seller be adjudicated a bankrupt of that
Seller be allowed or granted any composition, rearrangement,
extension, reorganization, or other relief under any bankruptcy
law or any other law for the relief of debtors now or hereafter
existing.
g. The death, dissolution, or termination of Seller.
h. If any guarantee of' the obligation of Seller hereunder shall be
terminated by the guarantor.
i. Purchaser deems itself insecure.
16. Rights Of Purchaser upon Seller's Default. Upon the occurrence of
default, and during the continuation thereof, Purchaser may (a) its a secured
party exercise it rights of enforcement under the Code. (b) immediately
terminate this Agreement as to future transactions, without affection the rights
and obligations of the parties accruing with respect to prior transactions: and
(c) exercise all other rights conferred by law and under this Agreement and
resort to any remedy existing at law or tit equity for the collection of any
indebtedness accrued hereby and for the enforcement of the covenants and
agreements contained herein including without limitation notifying account
debtors of and collecting the Collateral. The resort to any particular remedy
shall not prevent the concurrent or subsequent employment of any other
appropriate remedy or remedies.
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17. Term. This Agreement shall be effective from the date hereof and shall
continue in full force and effect until "terminated". This Agreement can be
terminated by either party by the delivery of written notice of termination to
the other party at least thirty (30) days prior to such termination date, but
such termination shall not effect or impair Purchaser's security interest in
thee Collateral as to any defaults that may have occurred prior to such
termination. Regardless of the above if Purchaser purchases or advances any sum
against any Account for or for Seller at termination of this agreement said
purchase and advance as well as the obligations of Seller shall he those
evidenced by this agreement unless a separate agreement is executed by all
parties.
18. Notice. Any notice. communication, assignment, or payment, required to
permitted hereunder. shall be send by United States mail, postage prepaid,
registered or certified mail. addressed is follows:
To Seller:
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American Fire Retardant Corporation
000 Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
To Purchaser
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Private Capital, Inc.
000 Xxxxxxx Xxxx.
Xxxxxxxxx, Xxxxxxxxx 00000
19. Attorney's Fees Seller agrees to reimburse Purchaser upon demand for
all attorney's fees. court costs, and other expenses incurred by Purchaser in
enforcing any of Purchaser's rights against Seller under this Agreement.
20. Indemnification Seller shall indemnify and hold Purchaser harmless from
and against all liability for any acts or omissions of Seller, its agents and
employees, including any attorney's fees and expenses incurred by Purchaser in
defending against any such claims asserted against Purchaser.
21. Severability Each and every provision, condition, covenant and
representation contained in this Agreement is, and shall be construed to be a
separate and independent covenant and agreement. If any term or provision of
this Agreement shall be any extent be invalid or unenforceable. the remainder of
the Agreement shall not be affected thereby.
22. No Waiver. Failure by Purchaser to exercise any of Purchaser's rights
hereunder shall not be deemed to be a waiver by Purchaser of such or any other
rights, nor in any manner impair the subsequent exercise of the same or any
other rights, and any waiver by Purchaser of any default shall not constitute a
waiver of any subsequent default.
23. Laws. This Agreement shall be construed according to the laws of the
State of Louisiana.
24. Complete Agreement. This Agreement embodies the complete agreement
between the parties hereto and cannot be varied or terminated except by the
written agreement of the parties. Purchaser has not made any promises,
representations or warranties not expressly stated herein.
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25. Paragraph Headings. The paragraph headings contained in this Agreement
are for convenience only and shall in no way enlarge or limit the scope or
meaning of the various and several paragraphs hereof.
26. Applicability. The terms and provisions of this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives and assigns.
27. Effective. This Agreement becomes effective when it is accepted and
executed by the Authorized officers of Private Capital, Inc.
28. Transfer\Assignment. Seller may not pledge, encumber, transfer or
assign any of its rights granted under this Agreement. Purchaser may assign,
sell, transfer or encumber all or any of its rights, interests or collateral
here under without notice to Seller and without affecting Seller's obligations
here under.
Executed this 17th day of April, 1997 at Lafayette, Louisiana American Fire
Retardant Corporation
American Fire Retardant Corporation Private Capital, Inc.
(Client) (Purchaser)
/s/ Xxxxxxx X. Xxxxx /s/ Xxxx X. Xxxxxx
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By: Xxxxxxx X. Xxxxx By: Xxxx X. Xxxxxx
Title: President Title: Vice President
/s/ Xxxxxx X. Xxxxxxx
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By: Xxxxxx X. Xxxxxxx
Title: Secretary
Corporate Resolution Attached (X) Yes
( ) No
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