EXHIBIT 10.23
RECEIVABLES SERVICING AGREEMENT
THIS RECEIVABLES SERVICING AGREEMENT ("Agreement") is entered into as
of this 28th day of April, 2000, by and among THE CIT GROUP/COMMERCIAL SERVICES,
INC., a New York corporation ("CIT"), KIDPOWER, INC., a Tennessee corporation
("Kidpower"), and FUNNOODLE (HK) LIMITED, formerly named Sun Master Investment
Limited, a company incorporated under the laws of Hong Kong Special
Administrative Region of the People's Republic of China ("Funnoodle (HK)").
W I T N E S S E T H:
WHEREAS, pursuant to an Asset Purchase Agreement (the "Purchase
Agreement"), dated as of October 25, 1999, by and among Funnoodle, Inc., a
Delaware corporation ("Funnoodle"), Kidpower, Toymax International, Inc.
("International") and ▇▇. ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, an individual, and a subsequent
Assignment of Contract, dated November 30, 1999, by and among Funnoodle (HK),
Funnoodle, International, Kidpower and ▇▇. ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ of all of
Funnoodle's rights and obligations under the Purchase Agreement, Funnoodle (HK)
has purchased from Kidpower certain of the properties and assets of the
Funnoodle product line (the "Funnoodle Product Line") of Kidpower;
WHEREAS, the Purchase Agreement was amended by a First Amendment to
Asset Purchase Agreement, dated April 5, 2000, by the parties thereto;
WHEREAS, in connection with the Purchase Agreement, Funnoodle (HK) and
Kidpower have entered into a Management Services Agreement (the "MSA"), dated as
of November 30, 1999, pursuant to the terms and conditions of which Kidpower has
agreed, among other things, to assist Funnoodle (HK) with the manufacture and
shipment of products related to the Funnoodle Product Line and the collection of
accounts receivable owing from customers to Funnoodle (HK) in respect of the
Funnoodle Product Line (such accounts receivable being hereinafter known as the
"Funnoodle Receivables");
WHEREAS, Kidpower and CIT are parties to a certain Factoring Agreement
dated December 9, 1999 (the "Kidpower Factoring Agreement"), and Toymax, Inc., a
New York corporation ("Toymax"), and CIT are parties to a certain Factoring
Agreement dated February 2, 1999 (the "Toymax Factoring Agreement"), as each
such agreement shall have been amended, modified or supplemented from time to
time.
WHEREAS, Funnoodle (HK) has entered into a Factoring Agreement dated
the date hereof with CIT (such Factoring Agreement, as from time to time
amended, modified, supplemented or restated, being hereinafter known as the
"Funnoodle Factoring Agreement"), pursuant to the terms and conditions of which,
CIT shall factor all of Funnoodle (HK)'s accounts receivable on a notification
basis (such receivables being hereinafter known as the "Factored
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Receivables") and extend credit and other financial accommodations to Funnoodle
(HK), all as more fully described in the Funnoodle Factoring Agreement;
WHEREAS, under the terms of the Funnoodle Factoring Agreement,
Funnoodle (HK) is required to notify Funnoodle (HK)'s customers that payment in
respect of all invoices evidencing Factored Receivables (I.E., all invoices
evidencing Funnoodle Receivables) is to be remitted to CIT's lockbox in
Charlotte, North Carolina;
WHEREAS, because Kidpower's sales and deliveries of its goods for its
own account which give rise to "Kidpower Receivables," and Kidpower's deliveries
of Funnoodle's (HK)'s goods on behalf of Funnoodle (HK) that give rise to
Funnoodle Receivables, are often to the same customer, billed pursuant to a
single account number (vendor number) give rise to "Combined Payments," and
because Kidpower has represented to CIT that many of such customers will remit
payment only to one vendor number and address, Kidpower and Funnoodle (HK) have
requested that CIT collect the Combined Payments and remit payment of Kidpower
Receivables received by CIT to Kidpower and payment of Funnoodle Receivables
received by CIT to Funnoodle (HK), as the case may be; and
WHEREAS, CIT has agreed to accommodate such requests of Funnoodle (HK)
and Kidpower pursuant to the terms and conditions contained in this Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby expressly acknowledged, CIT, Kidpower and
Funnoodle (HK) agree as follows:
1. IDENTIFICATION OF THE FUNNOODLE PROCEEDS. (a) CIT shall
establish two separate accounts on its books under Code No. __3126_______ for
Kidpower and Code No. _0603______ for Funnoodle (HK), solely to facilitate from
all Combined Payments the identification of remittances received by CIT from
Kidpower's customers on account of Kidpower Receivables and remittance received
by CIT from Funnoodle (HK)'s customers on account of Funnoodle Receivables.
Concurrently with delivery by Kidpower to CIT of invoices in respect of any
Combined Payments, Kidpower shall identify to CIT and to Funnoodle (HK), using
the aforementioned code, the invoices in respect of Funnoodle Receivables, if
any, and the invoices in respect of Kidpower Receivables, if any, CIT shall be
entitled to rely on Kidpower's exclusive instructions in identifying such
Kidpower Receivables and Funnoodle Receivables and the invoices in respect
thereof. In the event of any disagreement between Funnoodle (HK) and Kidpower as
to the accuracy of any such instructions issued by Kidpower, CIT shall follow
the joint written instructions of the parties therefor delivered to CIT as to
the resolution of any such disagreement or, if none, the instructions issued to
CIT by any independent arbitrator or mediator duly authorized by Funnoodle (HK)
and Kidpower to resolve such disagreement or dispute.
(b) Upon CIT's receipt of a payment from a customer
identified by Kidpower as obligated on account of Combined Payments, CIT shall
compare the invoice numbers on the remittance advice delivered with such payment
with the invoice numbers in respect of Combined Payments previously identified
by Kidpower, and shall thereby determine
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the portion of such remittance that is in payment of (i) Funnoodle Receivables
(such portion being hereinafter known as the "Funnoodle Proceeds") and (ii)
Kidpower Receivables (such portion being hereinafter known as the "Kidpower
Proceeds"). If CIT cannot determine whether a remittance, or any portion
thereof, is in payment of any Funnoodle Receivable or any Kidpower Receivable,
CIT shall promptly so advise Kidpower and Funnoodle (HK). Kidpower shall, within
two business days thereafter, advise CIT and Funnoodle (HK) in writing, using
the aforementioned code, of the amount payable in respect of any Funnoodle
Receivable, and the amount payable in respect of any Kidpower Receivable. Unless
CIT and Kidpower are notified by Funnoodle (HK) of its disagreement with such
determination by Kidpower, which notice shall be provided in writing within two
business days of receipt of Kidpower's instructions, CIT shall be entitled to
rely on Kidpower's exclusive instructions. CIT shall hold any disputed amounts
on its books as an "on account" payment (for which CIT shall not, nor shall CIT
be obligated to, pay any interest thereon) and CIT shall not apply any such
disputed amount(s) to any Funnoodle Receivable(s) or to any Kidpower
Receivable(s) until Kidpower and Funnoodle (HK) provide joint written
instructions to CIT as to the resolution of any such disagreement or, if none,
the instructions issued to CIT by any independent arbitrator or mediator duly
authorized by Funnoodle (HK) and Kidpower to resolve such disagreement or
dispute.
2. PAYMENT OF PROCEEDS. (a) Every Tuesday, CIT shall credit
Funnoodle's client position account (maintained by CIT pursuant to the Funnoodle
Factoring Agreement) with Funnoodle Proceeds received by CIT on the prior
Wednesday, Thursday and Friday. Every Thursday, CIT shall credit Funnoodle's
client position account with Funnoodle Proceeds received by CIT on the prior
Monday and Tuesday. CIT shall also credit Kidpower's client position account
(maintained by CIT pursuant to the Kidpower Factoring Agreement) in the same
manner, notwithstanding any provisions to the contrary which may be contained in
either the Funnoodle Factoring Agreement or in the Kidpower Factoring Agreement.
(b) Notwithstanding the provision of paragraph (a) above,
unless instructed otherwise in writing by Funnoodle (HK) and Kidpower, CIT shall
remit to Kidpower the first One Million U.S. Dollars ($1,000,000.00) in
immediately available funds received by CIT in payment of Funnoodle Receivables.
Thereafter, all amounts received by CIT in immediately available funds in
payment of any Funnoodle Receivable(s), CIT shall apply and credit to Funnoodle
(HK) in accordance with the Funnoodle Factoring Agreement.
3. FEE. Funnoodle (HK) shall pay to CIT a fee for CIT's
services hereunder equal to one tenth percent (0.1%) of the gross face amount of
Combined Payments processed under this Agreement.
4. TERM. This Agreement shall remain in effect until the
earliest to occur of any of the following: (i) termination of the Funnoodle
Factoring Agreement, (ii) termination of the Toymax Factoring Agreement; (iii)
termination of the Kidpower Factoring Agreement; or (iv) termination of that
certain Guaranty made by International to CIT for the obligations of Funnoodle
(HK) to CIT; or (v) Funnoodle (HK) and Kidpower agree in a joint writing
delivered to CIT to terminate this Agreement in thirty (30) days from the date
of CIT's receipt of such notice. Termination of this Agreement shall not affect
CIT's obligations as provided in this
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Agreement to remit Funnoodle Proceeds in respect of Funnoodle Receivables, or
Kidpower Proceeds in respect of Kidpower Receivables, arising prior to
termination of this Agreement. Kidpower and Funnoodle (HK) shall provide CIT
with wire instructions for the remittance of any such proceeds and shall pay
CIT's wire transfer fees for same.
5. INDEMNITY. (a) Funnoodle (HK) agrees to indemnify CIT and
hold CIT harmless from and against any and all loss, claim, liability, damage,
cost or expense suffered or incurred by CIT as a result of, or in connection
with, any third party claims arising from or relating to the arrangements
described in this Agreement, except to the extent attributable to CIT's gross
negligence or willful misconduct as determined by a court of proper
jurisdiction. By way of illustration only, such claims may include (i)
preference claims on account of any Funnoodle Receivables, (ii) claims for
overpayment or erroneous payment of any Funnoodle Receivables and (iii) claims
for disputes in respect of any Funnoodle Receivables.
(b) Kidpower agrees to indemnify CIT and hold CIT harmless
from and against any and all loss, claim, liability, damage, cost or expense
suffered or incurred by CIT as a result of, or in connection with Kidpower's
gross negligence or willful misconduct as determined by a court of proper
jurisdiction.
(c) The indemnities and rights contained in this Section 4
shall survive the termination of this Agreement.
(d) The duties and obligations of CIT under this Agreement
shall be administrative in nature, and CIT shall not, by reason of this
Agreement or its performance hereunder, have or be deemed to have an fiduciary
relationship with either Funnoodle (HK) or Kidpower.
6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns, except that no party to this Agreement may assign any of
its rights or obligations under this Agreement without the prior written consent
of all of the other parties to this Agreement.
7. ENTIRE AGREEMENT. This Agreement constitutes and expresses
the entire understanding among the parties hereto with respect to the subject
matter hereof.
8. GOVERNING LAW. This Agreement shall be governed and
construed in all respects in accordance with the laws of the State of New York
(without regard to conflicts of laws principles).
9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by different parties hereto on separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument.
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10. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF
THE PARTIES HERETO DOES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION ARISING OUT OF
OR RELATED TO THIS AGREEMENT.
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IN WITNESS WHEREOF, this Agreement has been duly executed on the date first
above-written.
CIT:
THE CIT GROUP/COMMERCIAL
SERVICES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
KIDPOWER:
KIDPOWER, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Executive Vice President
FUNNOODLE (HK):
FUNNOODLE (HK) LIMITED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Financial Officer
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