EXHIBIT 10.17
FACTORING AGREEMENT
SUMMIT Financial Resources, L. P. ("SUMMIT"), a Hawaii limited partnership, and
JK DISTRIBUTION INC., A NEVADA CORPORATION and XXXX XXXXX PRODUCTIONS, INC., A
DELAWARE CORPORATION ("Client's"), agree as follows:
1. Definitions.
a. "Acceptable account" shall mean an account of Client's
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's 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's, 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's (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's
purchases an account back from SUMMIT pursuant to the
recourse or limited non-recourse obligations of Client's 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 for the obligations of Client's
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's, 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's 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 SUMMIT owing to Client's,
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's, 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" means the filing of a petition for relief
under Chapter 7 or Chapter 11 of the United States Bankruptcy
Code by an account debtor within ninety (90) days of the date
of the invoice.
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.
l. "Rebate" shall mean the rebate described in Xxxxxxxxx 0,
Xxxxxxxx Price of Accounts, and 4, Payment of Purchase Price
and Rebate below.
m. "Reserve" shall mean the Reserve described in Paragraph 5,
Reserve for Security, below.
2. Factoring of Accounts.
SUMMIT may purchase from Client's such acceptable accounts as
Client's may submit to SUMMIT, subject to the terms and conditions
of this agreement. The obligation of SUMMIT to purchase accounts
from Client's is discretionary and SUMMIT shall have no obligation
to purchase any account from Client's, notwithstanding anything to
the contrary in this Agreement. SUMMIT may decline to purchase any
account submitted by Client's for any reason or for no reason,
without notice, regardless of any course of conduct or past
purchases of accounts by SUMMIT.
SUMMIT shall be the sole and exclusive factor for Client's
accounts. Client's will not factor or otherwise finance its accounts
receivable except with SUMMIT.
Notwithstanding anything to the contrary in this Agreement,
the purchase of accounts by SUMMIT 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.
Initial [_________] Date 3/29/01
1
3. Purchase Price of Accounts.
An advance shall be the amount paid to Client's by SUMMIT 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 Thirty-Five Percent (35%) of the face amount
of each account. The amount of the discount may be adjusted by
SUMMIT at any time. The discount will be indicated on the factoring
xxxx of sale.
Client's 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 Two
Percent (2.0%) of the face amount of each account for the first
Sixty (60) day period, or part thereof, and an additional One and
One Quarter of One Percent (1.25%) of the face amount of each
account for each additional Thirty (30) day period, or part thereof,
until payment in full is received on the account. If Client's are
declared in default pursuant to Section 25 of the Agreement,
Client's shall be obligated to pay to SUMMIT, on all obligations, a
base commission that is ten percent (10%) above the otherwise
applicable base commission from and after the occurrence and during
the continuance of an Event of Default.
The total daily funds charges will be determined as follows:
Daily Funds Rate
x Advance Amount
Daily Funds Charge
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 (2.00%) divided by 360. If
Client's are declared in default pursuant to Section 25 of the
Agreement, Client's shall be obligated to pay to SUMMIT, on all
obligations, a daily funds rate that is ten percent (10%) above the
otherwise applicable daily funds rate from and after the occurrence
and during the continuance of an Event of Default. The prime rate
shall be adjusted and initially determined in accordance with the
following provision:
At the option of SUMMIT, 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 SUMMIT until payment in full is received by
SUMMIT.
The Monthly Minimum Fee shall be determined by multiplying One
Half of One Percent (.50%) by the Maximum Credit Line. Such payment
shall be due and payable upon demand and may be treated as a
chargeback.
Client's shall be obligated to pay the Monthly Minimum Fee for
at least Twenty-four (24) months from the date of this Agreement,
notwithstanding any termination by Client's pursuant to Section 16,
Termination of Factoring, or any termination based on any Event of
Default. If Client's decide to terminate prior to the end of the
term, Client's will be obligated to pay the greater of Two Percent
(2.00%) of the Maximum Credit Line or the Monthly Minimum Fee
multiplied by the number of months remaining in the Factoring
Agreement. Unless Client's give SUMMIT written notice that it will
not renew this Agreement at least sixty (60) days prior to the end
of such period, this obligation to pay the Monthly Minimum Fee shall
automatically renew and be extended for successive additional
periods of Twelve (12) months each until such notice is timely
given. A Facility Fee of Two Percent (2.00%) of the Maximum Credit
Line shall be due and payable upon each one year anniversary date of
the Factoring Agreement.
At no time will the aggregate outstanding financed balance
exceed Three Hundred Fifty Thousand Dollars ($350,000.00) (the
"Maximum Credit Line"). A Line Origination fee of Two Percent
(2.00%) of the Maximum Credit Line shall be payable at the time of
the first advance.
Payments will be applied against proper accounts after
allowing five (5) business days for collection and clearance of
payments.
4. Payment of Purchase Price and Rebate.
Payment to Client's for accounts factored to SUMMIT will be
available within three (3) business days of the date the account and
all other required documentation is received by SUMMIT. Any rebate
owing to Client's by SUMMIT will be paid after the weekly collection
cycle or at such other intervals as may be determined by SUMMIT.
Payment shall be made in accordance with any written
instructions of Client's which are agreed to by SUMMIT. Absent other
instructions, payment shall be made by the mailing of a check to
Client's.
5. Reserve for Security.
As security for the payment of recourse obligations and
performance of all obligations of Client's hereunder, SUMMIT may
withhold a reserve (the "Reserve") from amounts owing to Client's by
SUMMIT
The Reserve may be funded by SUMMIT withholding amounts owing
to Client's for advances or for rebates or, upon request of SUMMIT,
Client's will from time to time pay SUMMIT an amount sufficient to
fund the Reserve.
In the sole discretion of SUMMIT, the amount of the Reserve
may be adjusted at any time.
SUMMIT may, at any time and from time to time, regardless of
whether the obligation is delinquent, setoff and apply all or any
part of the Reserve to any obligation of Client's owing to SUMMIT.
Upon doing so, SUMMIT may fund the resulting deficiency in the
Reserve by again withholding payments owing to Client's as provided
in this paragraph.
Upon termination of the right of Client's to submit accounts
to SUMMIT as provided in Paragraph 16 Termination of Factoring, any
balance of the Reserve shall be due and owing and paid to Client's
upon completion of the following conditions: (1) all amounts owing
to SUMMIT by Client's pursuant to this Agreement or otherwise have
been paid in full; and (2) Ninety-one (91) days have elapsed since
such termination.
Initial [_________] Date 3/29/01
2
SUMMIT shall be free to use the Reserve as working capital or
as SUMMIT otherwise determines. SUMMIT shall have no obligation to
segregate, not commingle or otherwise account for the use of the
Reserve. Client's shall not be entitled to any interest on the
Reserve. The Reserve shall be a debt owed to Client's by SUMMIT,
payable in accordance with the terms and conditions of this
Agreement.
6. Recourse and Limited Non-Recourse Purchases.
All accounts shall be purchased with limited non-recourse.
All account shall be subject to chargeback if not paid in full
within ninety (90) days of the date on the face of the invoice
unless the account debtor fails to pay due to a credit problem.
Client's agree to purchase any and all chargeback accounts, or
the uncollected portion thereof, from SUMMIT upon demand. The
purchase price to be paid by the Client's for a chargeback shall be
the face amount of the account, less any collections received on the
account by SUMMIT.
Any waiver or extension by SUMMIT of the right to demand that
Client's 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.
7. Credit Insurance.
SUMMIT 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). SUMMIT may elect to place coverage under
the policy on any accounts factored pursuant to this Factoring
Agreement and or require the Client's to purchase coverage under the
policy when any account represents Twenty Five percent (25%) of the
total outstanding factored accounts. Client's may also elect, by
written notice to SUMMIT, 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's shall pay SUMMIT 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's by SUMMIT.
Credit insurance coverage shall be subject to all terms and
conditions of the policy. No obligations of Client's 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 SUMMIT, SUMMIT shall, in
its discretion, pay the payment to Client's as reimbursement for
corresponding chargeback obligations creating the claim that
Client's has paid to SUMMIT, apply the payment to other obligations
of Client's to SUMMIT, 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.
SUMMIT may then (i) setoff such chargeback against any amount then
or thereafter owing by SUMMIT to Client's, including, without
limitation, payments for the purchase of accounts; (ii) notify
Client's that chargeback has been made, identifying the subject
accounts, whereupon Client's shall promptly purchase such accounts
and pay the amount owing to SUMMIT, (iii) SUMMIT may debit the
Reserve, or (iv) SUMMIT may exercise any combination of the
alternatives set forth in this paragraph as to any account or group
of accounts.
9. Collection Procedures.
a. SUMMIT shall have the exclusive right to collect accounts and
receive payments thereon. Client's shall not xxxx for, submit
any invoice, or otherwise attempt to collect any factored
account except as authorized in writing by SUMMIT.
b. Client's agrees to pay all reasonable handling and out of
pocket costs incurred by SUMMIT in collection of the accounts
of Client's, including, without limitation, postage, credit
and search expenses, photocopy charges, and long distance
phone expenses. Payment of such costs shall be due upon
request. SUMMIT may deduct such costs from amounts owing to
Client's and may debit the Reserve for such costs.
c. Client's shall promptly and completely respond to all requests
from SUMMIT for any information or records requested to assist
in collection of factored accounts. If Client's fails to
respond to any request within five (5) days, SUMMIT may treat
the account as a chargeback.
d. Client's may authorize SUMMIT to revise the amount of or
otherwise modify an outstanding account. SUMMIT 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 SUMMIT by Client's. 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's on an
account which has been purchased by SUMMIT, Client's shall
immediately deliver the payment to SUMMIT. If payment is made
in cash, such payment shall be immediately delivered to
SUMMIT. If payment is made by check or similar instrument,
such instrument shall be immediately delivered to SUMMIT in
the form received without negotiation. Upon inquiry from the
account debtor or upon request of SUMMIT, Client's shall
notify the account debtor to make payment directly to SUMMIT.
Any payments received by Client's on accounts purchased by
SUMMIT shall be held in trust by Client's for SUMMIT.
If any payment received by Client's on an account which has
been purchased by SUMMIT is deposited or negotiated by
Client's, or if Client's fails to tender the payment to SUMMIT
within five (5) business days of receipt by Client's, Client's
shall promptly pay SUMMIT an amount equal to ten percent (10%)
of the payment, not as a penalty but as liquidated damages, to
compensate SUMMIT for additional administrative and collection
expenses, interest costs and other damages resulting from such
action. Client's 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's to immediately deliver any such
payment or ten percent (10%) fee to SUMMIT, SUMMIT may treat
the amount of such payment and fee as a chargeback. The duty
of Client's to immediately deliver any such payment and to pay
any such fee to SUMMIT shall terminate only when such
chargeback is paid.
Client's acknowledge and agree that it has no right, title or
interest whatsoever in the funds constituting payment of an
account purchased by SUMMIT, that said funds are the sole and
exclusive property of SUMMIT, and that any use of or
interference with said funds by Client's will result in civil
and criminal liability.
f. Client's shall immediately notify SUMMIT of any account debtor
dispute concerning an account purchased by SUMMIT and of any
bankruptcy filing, lien, garnishment or other legal action
concerning such accounts.
g. SUMMIT 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 SUMMIT shall have no obligation to, commence any
legal action, including the sending of an attorney's demand
letter, to collect any account. Client's hereby waives and
releases any and all claims relating to or arising out of any
act or omission by SUMMIT in the collection of the factored
accounts, gross negligence and intentional misconduct
excepted.
Initial [_________] Date 3/29/01
3
h. Upon request of SUMMIT, Client's will cause all payments on
all accounts of Client's, whether or not factored to SUMMIT,
to be sent directly to such address as may be designated by
SUMMIT. SUMMIT is authorized to receive and open all such
payments and retain such payments which are owing to SUMMIT.
i. Upon request of SUMMIT, Client's will tender to SUMMIT all
payments received by Client's from an account debtor on
accounts created after Client's begins factoring any accounts
of that account debtor to SUMMIT, whether or not those
accounts are factored to SUMMIT. Upon such request being made,
all such payments received by Client's shall be the sole and
exclusive property of SUMMIT and shall be held in trust by
Client's for SUMMIT. All such payments shall be applied on
obligations of that account debtor to SUMMIT.
j. In the event SUMMIT receives any payment from an account
debtor on an account which has not been factored to SUMMIT,
SUMMIT may, subject to any rights of the account debtor, apply
such payment to any other obligation of Client's owing to
SUMMIT, including, without limitation, funding of any
deficiency in the Reserve.
10. Acceptable Accounts.
SUMMIT 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
SUMMIT in duplicate meeting the following conditions:
(1) Contain the Client's 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 SUMMIT;
(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
SUMMIT, stating that the account has been purchased by
SUMMIT and is payable to SUMMIT; and
(7) Be accompanied by such other documents as are required
by SUMMIT.
b. The account shall be submitted to SUMMIT 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 SUMMIT.
c. The invoice shall be accompanied by proof of delivery of goods
or performance of services acceptable to SUMMIT.
d. The account shall meet and comply with the following
conditions:
(1) Client's 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's, there are no defenses
or setoffs to payment of the account which can be
asserted by way of defense or counterclaim against
Client's or SUMMIT;
(4) To the best knowledge of Client's, 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's hereby grant SUMMIT a security interest in the
Collateral. The Collateral shall secure all obligations of Client's
to SUMMIT arising under or relating to this Agreement and all other
obligations of Client's to SUMMIT 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.
Clients' and SUMMIT acknowledge that all security interests
and liens contemplated herein are given as a contemporaneous
exchange for new value to Client's, regardless of when advances
under this Agreement are actually made.
12. Representations, Warranties and Covenants of Client's.
Client's represent, warrant and covenant that:
a. All accounts sold to SUMMIT are acceptable accounts;
b. Client's 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's, or, if Client's have more
than one place of business, the location of its chief
executive office, is in the City of Los Angeles, County of Los
Angeles, State of California, and will not be moved therefrom
without at least thirty (30) days prior written notice to
SUMMIT;
d. All records of Client's pertaining to accounts sold to SUMMIT
shall be kept and stored in the City of Los Angeles, County of
Los Angeles, State of California, and will not be moved
therefrom without at least thirty (30) days prior written
notice to SUMMIT;
e. The Equipment will be located in the State of California and,
other than temporary (not to exceed three months) uses outside
that state in the ordinary course of Clients' business, will
not be removed from that state without the prior written
consent of SUMMIT;
f. Client's shall keep the Equipment in good repair and be
responsible for any loss or damage to the Equipment. Client's
shall pay when due all taxes, license fees and other charges
on the Equipment. Client's 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's at all times unless SUMMIT takes possession of the
Equipment. Loss of or damage to the Equipment or any part
thereof shall not release Client's from any of the obligations
secured by the Equipment. SUMMIT 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;
Initial [_________] Date 3/24/01
4
g. Client's agree to insure the Equipment, at Clients' expense,
against loss, damage, theft, and such other risks as SUMMIT
may request to the full insurable value thereof with insurance
companies and polices satisfactory to SUMMIT. Proceeds from
such insurance shall be payable to SUMMIT as its interest may
appear and such policies shall provide for a minimum ten days
written cancellation notice to SUMMIT. Upon request, policies
or certificates attesting to such coverage shall be delivered
to SUMMIT. Insurance proceeds may be applied by SUMMIT toward
payment of any obligation secured by this agreement, whether
or not due, in such order of application as SUMMIT may elect.
h. Client's are duly qualified to do business in each
jurisdiction where the conduct of its business requires such
qualification,
i. Client's have 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;
j. Client's have 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's of this
Agreement have been duly authorized by all necessary action on
the part of Client's, and are not inconsistent with any
Articles of Incorporation, By-Laws, Articles of Partnership,
or other organizational document of Client's, do not and will
not contravene any provision of, or constitute a default
under, any indenture, mortgage, contract or other instrument
to which Client's 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's, enforceable in accordance with its terms;
l. All financial statements of Client's, and of any guarantor of
Clients' obligations under this Agreement, have been prepared
in accordance with generally accepted accounting principles
and fairly present the financial condition of Client's 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's or any such guarantor. Client's agrees to submit
financial statements for Client's to SUMMIT and Client's shall
cause any such guarantor to submit financial statements for
such guarantor to SUMMIT as may be requested by SUMMIT, 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 SUMMIT;
m. Client's 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's will at all times keep accurate and complete records
relating to its accounts. Client's shall not show factored
accounts as an asset on its financial statements. SUMMIT 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 SUMMIT and Client's. Reasonable out
of pocket expenses to conduct such audits or inspections will
be the responsibility of the Client's;
o. This Agreement, the financial statements referred to herein,
and all other statements furnished by Client's to SUMMIT 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's represents and warrants that it has not failed to
disclose in writing to SUMMIT any fact that materially and
adversely affects, or is reasonably likely to materially and
adversely affect, Client's's business, operations, properties,
prospects, profits, condition (financial or otherwise), or
ability to perform this Agreement; and
p. Client's agree to execute any financing statements, notices of
assignment, and other documents reasonably requested by SUMMIT
for perfection or enforcement of the rights and interests of
SUMMIT, and to give good faith, diligent cooperation to
SUMMIT, and to perform such other acts reasonably requested by
SUMMIT for perfection and enforcement of the rights and
interests of SUMMIT. SUMMIT is authorized to file, record, or
otherwise utilize such documents as it sees fit.
13. Representations, Warranties and Covenants Concerning Collateral.
Client's represent, warrant, and covenant concerning the
Collateral as follows:
a. Client's have 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 SUMMIT; 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 SUMMIT.
c. Client's agree to insure the Collateral, at Clients' expense,
against loss, damage, theft, and such other risks as SUMMIT
may request to the full insurable value thereof with insurance
companies and policies satisfactory to SUMMIT. Proceeds from
such insurance shall be payable to SUMMIT as its interests may
appear and such policies shall provide for a minimum ten days
written cancellation notice to SUMMIT. Upon request, policies
or certificates attesting to such coverage shall be delivered
to SUMMIT. Insurance proceeds may be applied by SUMMIT toward
payment of any obligation secured by the Collateral, whether
or not due, in such order of application as SUMMIT may elect.
14. Assignment of Rights Concerning Collateral.
Client's hereby assign to SUMMIT all of its interest in and
rights to any inventory or other goods giving rise to the accounts
factored to SUMMIT 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 SUMMIT, and held for the account of SUMMIT.
Client's will promptly notify SUMMIT of all such returned or
recovered inventory or other goods.
Upon request, Client's shall deliver such inventory or other
goods to SUMMIT. SUMMIT may take possession of such inventory or
other goods and resell such inventory or other goods. Client's 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
SUMMIT and the net proceeds credited against the obligations of
Client's.
15. Adjustments Upon Refund of Collections.
In the event SUMMIT 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's shall promptly reimburse SUMMIT for such amount. Such
reimbursement may be treated as a chargeback.
Initial [_________] Date 3/29/01
5
16. Termination of Factoring.
The right of Client's to submit accounts to SUMMIT for
factoring shall remain in force and effect until terminated by
either party hereto by giving sixty (60) days written notice of such
termination. This Agreement may be terminated by SUMMIT at any time
without notice should any default occur. Upon the effective date of
such notice, Client's and SUMMIT shall be excused from the covenants
of the second paragraph of Paragraph 2 Factoring of Accounts
providing that SUMMIT shall be the sole and exclusive factor for
Clients' accounts.
Upon such termination or in the event an Event of Default
terminates the right of Client's to submit accounts to SUMMIT, at
the election of SUMMIT all outstanding, recourse accounts factored
to SUMMIT may be immediately subject to chargeback.
In the event Client's elect to terminate its right to submit
accounts to SUMMIT or an Event of Default terminates the right of
Client's to submit accounts to SUMMIT within ninety (90) days of the
date of this Agreement, Client's shall forfeit to SUMMIT twenty-five
percent (25%) of the Reserve, not as a penalty but as liquidated
damages to compensate SUMMIT for loss of profits, recovery of
expenses, and other damages resulting from such premature
termination. Client's acknowledge and agree that it would be very
difficult or impossible to calculate such amounts and that
twenty-five percent (25%) of the Reserve is a fair estimation of
those amounts.
17. Right to Perform for Client's.
SUMMIT may, in its sole discretion, elect to discharge any
security interest, lien or other encumbrance upon any account
purchased by SUMMIT from Client's, elect to pay any insurance
charges payable by Client's or provide insurance as required herein
if Client's fails to do so. Any such payments and all expenses
incurred in connection therewith shall be treated as a chargeback.
SUMMIT 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's is indebted to SUMMIT
as the account debtor on any account which has been purchased by
SUMMIT, SUMMIT may treat such debt as a chargeback.
18. Power of Attorney to Endorse Checks.
Client's does hereby make, constitute and appoint SUMMIT, 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's upon any checks or other forms of payment on accounts
purchased by SUMMIT and to effect the deposit and collection
thereof. Such power may be exercised at any time. Client's does
hereby make, constitute, and appoint SUMMIT, and its designees, as
Clients' 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) receive, open, and dispose of all mail
addressed to Client's; (b) cause mail relating to accounts of
Client's sold to SUMMIT to be delivered to a designated address of
SUMMIT where SUMMIT may open all such mail and remove therefrom any
payment of such accounts; (c) SUMMIT may settle or adjust account
debtor disputes in respect to said accounts for amounts and upon
such terms as SUMMIT, in good faith, deems to be advisable, in such
case crediting Client's with only the proceeds received and
collected by SUMMIT after deduction of SUMMIT' costs, including
reasonable attorneys fees and legal expenses; and (d) SUMMIT 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 SUMMIT
created under this Agreement. Exercise of any of the foregoing
powers shall be in the sole discretion of SUMMIT without any duty to
do so.
19. Disclosure of Information.
Client's hereby consents to SUMMIT disclosing to any financial
institution or investor providing financing for SUMMIT, any and all
information, knowledge, reports and records, including, without
limitation, financial statements, concerning Client's or any
guarantor.
20. Fee on Unpaid Chargebacks.
In the event Client's fail to pay any chargeback, Client's
agree to pay a fee on the chargeback amount from the date of
chargeback until paid, both before and after judgment, of thirty six
percent (36%) per annum, unless such fee is in violation of law in
which case such fee shall be at the maximum rate allowable by law.
21. Sale of All Acceptable Accounts.
Unless otherwise agreed in writing by SUMMIT, Client's may not
sell only a portion of the accounts for any particular account
debtor to SUMMIT but shall offer to sell to SUMMIT all acceptable
accounts of an account debtor unless Client's elects not to sell any
accounts of that account debtor to SUMMIT.
22. Collection of Chargeback Accounts.
Until a chargeback has been paid in full, SUMMIT 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 SUMMIT in seeking collection of such
chargeback account(s) shall be added to the amount due for payment
of said chargeback. Client's hereby authorizes SUMMIT to initiate
any legal action to collect a chargeback account which is not paid
by Client's within fifteen (15) days of chargeback. Client's further
authorizes SUMMIT to settle or compromise any such chargeback
account, in the sole discretion of SUMMIT 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.
23. No Third Party Beneficiary.
This Agreement is made for the sole and exclusive benefit of
SUMMIT and Client's 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's agree to indemnify SUMMIT for any and all claims,
liabilities, and damages which may be awarded against SUMMIT, 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
SUMMIT. SUMMIT 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 SUMMIT, 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's to promptly repurchase any account or pay
any chargeback in accordance with the terms of this Agreement;
b. Client's 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's in this Agreement, or on behalf of
any guarantor of this Agreement, proves to have been false or
materially misleading when made or furnished;
Initial [_________] Date 3/29/01
6
d. Any default or event which, with the giving of notice or the
passage of time or both, occurs on any indebtedness of
Client's or any such guarantor to others;
e. Client's 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
Clients' or any such guarantor's property, or any part of
Clients' 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's or any
such guarantor;
h. Any judgment is entered against Client's or any such guarantor
which may materially affect Clients' or any such guarantor's
financial condition;
i. Client's or any such guarantor becomes insolvent or unable to
pay its debts as they mature; or
j. The accounts purchased by SUMMIT from Client's become, for any
reason whatsoever, substantially delinquent or uncollectible.
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 SUMMIT and without notice of such
election, SUMMIT may terminate the right of Client's or factor
accounts to SUMMIT and all obligations of Client's to SUMMIT shall
become immediately due and payable. At the election of SUMMIT, all
outstanding recourse accounts and outstanding limited recourse
accounts which are eligible for chargeback may be immediately
subject to chargeback. SUMMIT 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's shall, if requested by SUMMIT, assemble such Collateral and
records at a place designated by SUMMIT. SUMMIT shall have all
rights and remedies under the Uniform Commercial Code. Without
notice to Client's, SUMMIT may obtain the appointment of a receiver
of the business, property and assets of Client's and Client's
consents to the appointment of SUMMIT or such person as SUMMIT may
designate as such receiver. SUMMIT may continue to hold the Reserve
for payment of any obligations of Client's to SUMMIT then existing
or which may thereafter arise. At any time after the occurrence of
an Event of Default, SUMMIT may, in its desecration, apply the
reserve against obligations of Client's owing to SUMMIT. In the
event the Reserve is applied against chargeback shall remain the
property of SUMMIT and SUMMIT may continue to pursue and collect
such accounts until all obligations of Client's to SUMMIT then owing
or which may thereafter arise have been paid in full or are
otherwise satisfied.
SUMMIT 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 SUMMIT, 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. Payment of Expenses and Attorneys Fees.
Client's shall pay all reasonable expenses of SUMMIT relating
to the negotiation, drafting of documents, and documentation of this
Agreement, and administration of this Agreement, including, without
limitation, title insurance, recording fees, filing fees, reasonable
attorneys fees and legal expenses, audit fees, inspection fees, wire
transfer fees, and overnight delivery expenses, whether incurred in
entering into this Agreement, in future amendments or modifications
to this Agreement, or in ongoing administration of this Agreement.
SUMMIT currently charges a fee for field audit of Clients' records
and business of $600.00 per day plus travel expenses.
Upon occurrence of an Event of Default, Client's agrees to pay
all costs and expenses, including reasonable attorney fees and legal
expenses, incurred by SUMMIT in enforcing or exercising any remedies
under this Agreement or any other rights and remedies.
Client's agrees to pay all expenses, including reasonable
attorney fees and legal expenses, incurred by SUMMIT in any
bankruptcy proceedings of any type involving Client's, this
Agreement, or the Collateral, 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.
27. Bankruptcy Considerations.
In addition to any other covenants made herein by Client's,
Client's covenant that they will notify SUMMIT of any voluntary or
involuntary bankruptcy petition filed by or against Client's or any
guarantor of this Agreement under the United States Bankruptcy Code,
within twenty-four (24) hours of any such filing. Failure to notify
SUMMIT of any such bankruptcy filing within twenty-four (24) hours
shall constitute an Event of Default.
Client's acknowledges that this Agreement is a contract to
extend debt financing or financial accommodations to or for the
benefit of Client's within the meaning of 11 U.S.C. Section
365(c)(2) and, as such, may not be assumed or assigned. SUMMIT shall
be under no obligation to purchase accounts under this Agreement
from and after the filing of any voluntary or involuntary petition
against Client's. However, SUMMIT 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's. Any such agreement to
provide post-petition financing shall not obligate SUMMIT to
purchase accounts until such time as the Bankruptcy Court approves
the post-petition financing agreement.
28. Jury Waiver, Exclusive Jurisdiction of Utah Courts.
Client's hereby irrevocably submits to the jurisdiction of any
Utah State or Federal court sitting in Salt Lake County in any
action or proceeding arising out of or relating to this Agreement,
or any other agreements, and Client's hereby irrevocably agrees that
all claims, with respect to such action or proceeding court.
Client's hereby irrevocably waives, to the fullest extent Client's
may effectively do so, the defense of inconvenient forum to the
maintenance of such action or proceeding. Client's irrevocably
consents to the service of any and all process in any such action or
proceeding by the mailing of copies of such process to Clients'
address specified in the Agreement. Client's agrees that a final
judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in
any other matter provided by law. Nothing in this Section shall
affect SUMMIT'S right to serve legal process in any other manner
permitted by law or affect SUMMIT'S right to bring an action or
proceeding against Client's or Clients' properly in the courts of
other jurisdictions.
CLIENT'S HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY OF ANY
ACTION OR PROCEEDING ASSERTING ANY CAUSE OF ACTION, CLAIM, THIRD
PARTY CLAIM OR COUNTERCLAIM (COLLECTIVELY, "CLAIMS") ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OTHER AGREEMENT, OR THE
COLLATERAL. THIS WAIVER EXTENDS TO ALL SUCH CLAIMS, INCLUDING,
WITHOUT LIMITATION, CLAIMS WHICH INVOLVE PERSONS OR ENTITIES OTHER
THAN SUMMIT, CLAIMS WHICH ARISE OUT OF OR ARE IN ANY WAY CONNECTED
TO THE RELATIONSHIP BETWEEN SUMMIT AND CLIENT'S, AND ANY CLAIMS FOR
DAMAGES, BREACH OF CONTRACT, SPECIFIC PERFORMANCE, TORT OR ANY
EQUITABLE OR LEGAL RELIEF OF ANY KIND.
Initial ___________ Date 3/29/01
7
29. 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 the collective or conjunctive shall also
include the disjunctive unless the context otherwise clearly
requires a different interpretation.
30. Notices.
All notices hereunder shall be in writing and may be mailed,
postage prepaid, addressed as follows:
To SUMMIT:
SUMMIT Financial Resources, L. P.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
Attention: Director of Operations
To Client's:
JK Distribution Inc.
0000 Xxxxxxxx Xxxxxx (P.O. Box 691447)
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx
Xxxx Xxxxx Productions, Inc.
0000 Xxxxxxxx Xxxxxx (P.O. Box 691447)
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx
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.
31. Survival of Representations. Warranties and Covenants.
All agreements, representations, warranties and covenants made
herein by Client's shall survive the execution and delivery of this
Agreement and any bankruptcy proceedings involving Client's and
shall continue in effect so long as any obligation to SUMMIT
contemplated by this Agreement is outstanding and unpaid,
notwithstanding any termination of this Agreement.
32. Assignability.
This Agreement is not assignable or transferable by Client's
and any such purported assignment or transfer is void. This
Agreement shall be binding upon the successors of Client's. Client's
acknowledges and agrees that SUMMIT may assign all or any portion of
this Agreement, including, without limitation, assignment of the
rights, benefits and remedies of SUMMIT hereunder without any
assignment of the duties, obligations or liabilities of SUMMIT
hereunder.
33. Integrated Agreement. Amendment, Headings. Governing Law.
This Agreement shall replace and supersede any prior agreement
between Client's and SUMMIT.
This Agreement and the documents identified or contemplated
herein constitute the entire agreement between SUMMIT and Client's
as to the subject matter hereof and may not be altered or amended
except by written agreement signed by SUMMIT and Client's. No
provision hereof may be waived by SUMMIT except upon written waiver
executed by SUMMIT. 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: 3/29, 2001.
JK Distribution Inc.
BY: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxxxx
Title (Its): Chairman/CEO
Xxxx Xxxxx Productions, Inc.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxxxx
Title (Its): Chairman/CEO
Witnessed or verified signature by: [ILLEGIBLE]
SUMMIT Financial Resources, L. P.,
a Hawaii limited partnership
By: [ILLEGIBLE]
Title: Authorized Representative
Initial_____ Date ________
8
