Exhibit 10.5
▇▇▇▇▇▇ FINANCIAL, INC.
RETAIL
Collection Factoring Agreement
Pivot Corporation
990 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Gentlemen:
The following shall constitute the terms upon which we shall act as your sole
factor (see Section 12 for the definition of certain capitalized terms):
SECTION 1. Sale and Approval of Accounts
1.1 You hereby sell, assign and transfer to us and we hereby purchase from you
all of your now outstanding and hereafter created or acquired Accounts,
with full power to collect and otherwise deal therewith as the sole and
exclusive owner thereof.
1.2 (a) You will submit for our credit approval your customers' credit
requirements, a description of your normal selling terms and such other
information as we may request concerning your customers. We may, in our
sole credit judgment, establish credit lines for sales to your customers
on your normal selling terms and all sales to such customers within the
established credit line will be Approved Accounts provided that delivery
or performances completed while the credit line remains in effect. You may
also submit for credit approval, specific orders from your customers and
we may, in our sole credit judgment, approve such orders on a single order
approval basis. All of our credit approvals will be in writing.
(b) We reserve the right to amend or withdraw a credit line at any time by
advice to you, which advice will be promptly confirmed in writing. A
credit line will be automatically suspended (i.e. temporarily withdrawn)
during any period that the customer is 60 or more days past due.
(c) We may withdraw a single order credit approval by notifying you
verbally and/or writing at any time prior to the delivery of goods or
performance of services. A single order credit approval will be
automatically withdrawn: (i) in the event delivery or performance is not
made within forty-five (45) days after the date specified for delivery or
performance in your request for credit approval or within forty-five (45)
days from the date of our approval if no delivery or performance date is
specified; or (ii) in the event any change is made in the payment terms or
delivery date of the Account or in the event that the dollar amount of the
Account is increased without our prior written approval.
(d) We shall have no liability to you or to any customer for our refusal
to credit approve an Account or our withdrawal of a credit approval.
1.3 We will assume the Credit Risk on all Approved Accounts. We shall have
full recourse to you for all Non-Approved Accounts.
1.4 In the event that monies shall, at any time, be owing from one of your
customers for both Approved Accounts and Non-Approved Accounts, we will
apply all payments received as follows:
(a) if we issued single order approvals, all payments received will be
first applied to the Approved Accounts;
(b) if we established a credit line for the customer, (i) provided that
the amount of outstanding Accounts did not at any time exceed twice the
established credit line and the credit line is still in effect at the time
payment is received, all payments shall first be applied to the
Non-Approved Accounts; (ii) if the amount of outstanding Accounts did at
any time exceed twice the established credit line or if prior to the
receipt of payment we have withdrawn the credit line, all payments
received shall first be applied to Approved Accounts;
(c) if an insolvency proceeding has been instituted by or against the
customer, we shall share all payments paripassu.
SECTION 2. Payment and Fees
2.1 We will purchase each Account on the longest or shortest selling terms, at
our option, and will pay you as the purchase price the net amount thereof
calculated by deducting from the gross amount of each Account the
discount, if any, our factoring commission and all credits, including,
without limitation, merchandise returns, allowances, and chargebacks and
all other charges provided for hereunder. The purchase price less
advances, interest and any other amounts due us will be paid to you on the
Collection Date.
2.2 At the time we purchase each Account, or thereafter, we may, upon your
request, and in our sole discretion, advance you up to eighty (80%)
percent of the purchase price of such Account.
2.3 You will pay us a factoring commission of one and one-quarter (1.25%)
percent of the Net Account purchased by us but in no event less than $4.00
per invoice purchased.
2.4 Commencing July 1, 1992 and every year thereafter (the 12 months
immediately following such date or any anniversary thereto you agreed to
pay to us factoring commissions aggregating at least $30,000.00 "Minimum
Annual Commission"). If during any month the aggregate of factoring
commissions paid by you is less than $2,500.00 ("Minimum Monthly
Commission"), then you shall pay to us, or we may charge your account with
an amount equal to the difference between the Minimum Monthly Commission
and the factoring commissions actually paid during that month (the
Deficiency Charge"). At such time as you exceed the Minimum Annual
Commission, the Minimum Monthly commission shall be waived for the
remainder of the contract year and the Deficiency Charges paid during said
contract year shall be applied against subsequent factoring commission
charge incurred during said contract year.
2.5 We will charge your account our standard wire transfer fee on all wire
transfers, and you will reimburse us for exchanges on checks, charges for
returned items and all
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other bank charges. We may also, at our option, charge your account for
all amounts owning by you to us under this Agreement and all other
Obligations.
SECTION 3. Interest
3.1 You will pay us interest on the daily balance of all monies remitted, paid
or otherwise advanced to you or for your account net of all payments
received from you or on your behalf including the purchase price of
Accounts purchased by us hereunder which is credited to your factoring
account on the Collection Date. Interest will be calculated daily at a
rate per annum equal to two (2%) percent plus the Base Rate (the "Interest
Rate") and will be charged to your factoring account monthly, in arrears.
The Interest Rate will also be charged to you on all other indebtedness
due by you to us under this Agreement and on all Obligations, except those
specifying a different rate, from the date incurred through the date paid.
Any publicly announced decrease or increase in the base Rate shall result
in an adjustment to the Interest Rate on the next business day. Interest
shall be calculated on the basis of a 360-day year for the actual number
of days elapsed. In no event shall the Interest Rate exceed the maximum
rate permitted by applicable law and in the event excess interest is paid,
it shall be considered a repayment of the principal.
3.2 If funds remain with us past the Collection Date ("matured funds"), we
will pay you interest on such matured funds at the rate per annum equal
tot he Base Rate minus two (2%) percent. Any change in the Base Rate shall
result in an adjustment in the matured funds rate on the next business
day.
3.3 If an Account or any payment is charged back to you after the Collection
Date, you will pay us interest at the Interest Rate on such Net Account or
such payment from the Collection Date to the chargeback date.
SECTION 4. Representations, Warranties and
Covenants
4.1 You represent, warrant and covenant as to each Account sold and assigned
hereunder that, at the time of its creation, the Account is a valid, bona
fide account, representing an undisputed indebtedness incurred by the name
account debtor for goods actually sold and delivered or for services
completely rendered; there are no setoffs, offsets or counterclaims,
genuine or otherwise, against the Account; the Account does not represent
a sale to a parent, subsidiary or affiliate or a consignment, sale or
returned or a ▇▇▇▇ and hold transactions; no agreement exists permitting
any deduction or discount (other than the discount stated on the invoice);
you are the lawful owner of the Account and have the right to sell and
assign the same to us; the Account is free of all security interests,
liens and encumbrances other than those in our favor, and the Account is
due and payable in accordance with its terms.
4.2 You shall not grant or suffer to exist any lien upon or security interest
in your inventory in favor of any party other than us without our written
consent.
4.3 You are a solvent corporation; duly incorporated and in good standing
under the laws of the State of New York and qualified in all States where
such qualification is required; the execution, delivery and performance of
this Agreement have been duly authorized and
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are not in contravention of any applicable law, your charter or by-laws or
agreement or order by which you are bound.
4.4 You shall not change your corporate name or the location of your office or
open any new officers without giving us at least thirty (30) days prior
written notice. At the present time, you carry on business only at the
above address and the addresses set forth below.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
4.5 All books and records pertaining to the Accounts or to any inventory owned
by you shall be maintained solely and exclusively at the above address or
the addresses listed in Section 4.4 hereof and no such books and records
shall be moved or transferred without giving us thirty (30) days prior
written notice.
4.6 You shall not sell, lease, transfer or otherwise dispose of all or
substantially all of your property or assets, or consolidate with or merge
into or with any corporation or entity without our prior written consent.
4.7 After our request, you shall hold all returned, replevined or reclaimed
goods coming into your possession in trust for us and all such goods shall
be segregated and identified as held in trust for our benefit and you
shall, at our request, and at your expense, deliver such goods to such
place or places as we may designate.
4.8 The tradenames or styles set forth below are the only tradenames or styles
under which you transact business; Accounts sold to us hereunder and
represented by invoices bearing such tradenames or styles are wholly owned
by you; the undertakings, representations and warranties made in
connection therewith shall be identical to and of the same force and
effect as those made with respect to invoices bearing your corporate name.
None.
4.9 No discounts, credits or allowances will be issued, granted or allowed by
you to customers and no returns will be accepted without or prior written
consent; provided, however, that until we notify you to the contrary, you
may presume our consent. Discounts, credits or allowances once issued may
be claimed only by the customer.
SECTION 5. Disputes, Chargebacks and
Reserves
5.1 With respect to any Account, upon the occurrence of a breach of any of the
representations or warranties contained in Section 4.1, or the assertion
by a customer of a Dispute or other defense to payment, other than
financial inability, an Approved Account shall automatically become a
Non-Approved Account and we may charge back such Account to you.
5.2 You shall notify us immediately in the event that a customer alleges any
Dispute, or returns or desires to return any goods purchased from you. We
may, but are not obligated to settle, compromise, adjust or litigate all
such Disputes or returns upon such terms as we deem advisable. If an
unadjusted Dispute delays the payment of any Approved Account when due,
our credit approval is automatically withdrawn and we shall have the right
to charge back to you that Account and all other amounts owing by that
customer.
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5.3 We may, at our option, charge back to you all amounts owing on
Non-Approved Accounts which are not paid when due.
5.4 We shall have the right to charge back to you any payment which we
received with respect to a Non-Approved Account if such payment is
subsequently disgorged by us, whether as a result of any proceeding in
bankruptcy or otherwise.
5.5 A chargeback shall not constitute a resale to you of said Amount; however
upon payment by you to us of all monies due with respect to such charged
back account, title thereto shall revert to you, subject, however, to our
security interest therein. You agree to indemnify and save us harmless
from and against any and all loss, costs and expenses, caused by or
arising out of disputed Accounts, including, but not limited to,
collection expenses and attorney's fees incurred with respect thereto.
5.6 We may maintain such reserves as we, in our sole discretion, deem
advisable as security for the payment and performance of all of your
Obligations.
SECTION 6. Administration
6.1 (a) You shall, from time to time, execute and deliver to us confirmatory
schedules of Accounts sold to us, together with one copy of each invoice
and upon request, acceptable evidence of shipment and such other
documentation and proofs of delivery as we may require. Each invoice shall
bear a notice, in form satisfactory to us, that it has been sold and
assigned to and is payable only to us. You agree to prepare and mail all
invoices, but we may do so at our option. You agree to execute and deliver
to us such further instruments of further assurance as we may reasonably
require. You authorize us to execute on your behalf and file such UCC
financing statements as we may deem necessary in order to perfect and
maintain the security interests granted by your in accordance with this
and any other agreement between you and us, and you further agree that we
may filed this Agreement or a copy thereof as such UCC financing
statements. You agree to bear the cost of all filing fees, filing taxes,
search reports, legal fees and other charges incurred by us in the
perfection, protection and preservation of the rights and collateral
security herein granted to us.
(b) If any remittances are made directly to you, your employees or agents,
you shall act as trustee of an express trust for our benefit, hold the
same as our property and deliver the same to us forthwith in kind. We
and/or such designee as we may from time to time appoint, are hereby
appointed your attorney-in-fact to endorse your name on any and all checks
or other forms of remittances received by us where such endorsement is
required to effect collection; this power, being coupled with an interest
is irrevocable.
(c) We may, at all times, have access to, inspect and make extracts from
all your records, files and books of account. We may, at any time after
default by you hereunder, remove from you premises all such records, files
and books relating to Accounts. You will promptly furnish with all
statements prepared by or for you showing your financial condition and the
results of your operations and such other statements as we may reasonably
require. You authorize us to communicate directly with your independent
certified public accountants and authorize such accountants
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to discuss your financial condition and statements directly with us.
6.2 If we determine that the credit standing of a customer has deteriorate
after we have assumed the Credit Risk on an Account, you shall, at our
request, exercise such rights as you may have to reclaim or stop the goods
in transit, and you hereby grant us the right to take such steps in your
name or ours.
6.3 We shall render a monthly Statement of Account to you within twenty (20)
days after the end of each month. Such Statement of Account shall
constitute an account stated unless you make written objection thereto
with thirty (30) days from the date such statement is mailed to you.
6.4 You authorize us to disclose such information as we deem appropriate to
persons making credit inquiries about you.
SECTION 7. Collateral Security
As collateral security for all Obligations, you hereby assign and grant to
us a continuing security interest in: (i) all of your presently existing
an hereafter created Accounts and generally intangibles and the proceeds
thereof; (ii) all monies, securities and other property now or hereafter
held or received by, or in transit to us from or for you, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and
all of your deposits and credit balances in our possession; (iii) all
returned, reclaimed or repossessed goods and the documents evidencing or
relating to such goods; (iv) all books, records and other property at any
time evidencing or relating to the Accounts; and (v) the proceeds of any
of insurance policies covering any of the foregoing. Recourse to the
collateral security herein provided shall not be required, and you shall
at all times remain liable for the payment and performance of all of your
Obligations upon demand by us.
SECTION 8. Events of Defaults
The occurrence of any of the following acts or events shall constitute an
Event of Default: (a) if you fail to make payment of any of your
Obligations when due, (b) if you fail to make any remittance required by
this Agreement, (c) if you commit any breach of any of the terms,
representations, warranties, covenants, conditions or provisions of this
Agreement, or of any present or future supplement or amendment hereto or
of any other Agreement between us, (d) if you become insolvent or unable
to meet your debts as they mature, (e) if you deliver to us a false
financial statement, (f) if you call, or have called by a third party, a
meeting of creditors, (g) if you have commenced by or against you any
bankruptcy proceeding, insolvency, arrangement or similar proceeding, (h)
if you suspend or discontinue doing business for any reason, (i) if a
receiver or trustee on any kind is appointed for you or any of your
property, (j) if any guarantor of your Obligations shall become insolvent
or have commenced by or against such guarantor any bankruptcy proceeding,
(k) if any guaranty of your Obligations is terminated, or (l) if any
change of ownership occurs with respect to more than forty (40%) percent
of your capital stock.
Upon the occurrence of an Event of Default, we shall have the right to
terminate this Agreement and all other arrangements existing between us
forthwith and without notice, and all of your Obligations to us shall
mature and
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become immediately due and payable and we shall have the right to withhold
any further payments to you until all Obligations have been paid in full.
In addition, we shall have all the rights of a secured party under the
Uniform Commercial Code, including, without limitation, the right to take
possession of any collateral in which we have a security interest and to
dispose of same at public or private sale and you will be liable for any
deficiency. We shall not be required to proceed against any collateral but
may proceed against you directly. In the event we institute suit against
you, you Agree to pay our costs and reasonable attorney's fees.
SECTION 9. Term and Termination
This Agreement shall continue in full force and effect until terminated by
either party hereto giving the other party not less than sixty (60) days
prior written notice thereof. Notice of termination shall be given by
messenger, registers or certified mail or commercial delivery service;
provided however, that you shall not terminate this Agreement so long as
you are indebted or obligated to us in connection with any other financing
arrangements. Not withstanding such notice of termination, our respective
rights and obligations arising out of transactions having their inception
prior to the specified date of termination shall not be affected by such
termination and all terms, provisions and conditions hereof, including but
not limited to, the security interests hereinabove granted to us, shall
continue in full force and effect until all Obligations have been paid in
full. All of the representations, warranties and covenants made herein
shall survive the termination of this Agreement.
SECTION 10. Modifications
This Agreement cannot be changed or terminated orally; it constitutes the
entire Agreement between us and shall be binding upon our respective
successors and assigns, but may not be assigned by you without our prior
written consent. No delay or failure on our part in exercising any right,
privilege, or option hereunder shall operate as a waiver thereof or of any
other right, privilege or option. No waiver whatsoever shall be valid
unless in writing, signed by us, and then only to the extent therein set
forth. If any term or provision of this Agreement is held invalid under
any statute, rule or regulation of any jurisdiction competent to make such
a decision, the remaining terms and provisions shall not be affected, but
shall remain in full force and effect.
SECTION 11. Governing Law, Venue and
Waiver of Jury
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York. You hereby consent to the jurisdiction of
any local, state or federal court located within the State of New York. If
you presently are, or in the future become, a non-resident of the State of
New York, you hereby waive personal service of any and all process and
agree that all such service of process may be made by certified or
registered mail, return receipt requested, directed to you, at your
address appearing in our records and service so made shall be complete ten
(10) days after the same has been posted as aforesaid. YOU HEREBY WAIVE
YOUR RIGHT TO TRIAL BY JURY IN ANY SUIT OR PROCEEDING ARISING UNDER OR
RELATING TO THIS AGREEMENT.
SECTION 12. Definitions
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12.1 "Accounts" - All presently existing and hereafter created accounts,
contract rights and general intangibles relating thereto, notes, drafts
and other forms of obligations owned to or owned by you arising or
resulting from the sale of goods or the rendering of service, all
proceeds thereof, all guaranties and security therefor, and all goods and
rights represented thereby or arising therefrom including, but not
limited to, the right of stoppage in transit, replevin and reclamation.
12.2 "Approved Account" - an Account with respect to which we have issued a
credit approval which has not subsequently been withdrawn.
12.3 "Base Rate" - the rate of interest publicly announced from time to time
by The Chase Manhattan Bank, N.A. as its prime or base rate (or
equivalent).
12.4 "Collection Date" - The earlier to occur of (a) 5 business days after the
receipt by us of payment of the Account or (b) 120 days after the due
date of the Account, provided that the accounts debtor has not asserted a
Dispute.
12.5 "Credit Risk" - The risk that a customer will be financially unable to
pay an Account at maturity, provided that the merchandise has been
received or services rendered and accepted by the customer without
Dispute.
12.6 "Dispute" - A dispute or claim, bona fide or otherwise, as to price,
terms, quantity, quality or any cause or defense to payment whatsoever
other than financial inability to pay.
12.7 "Net Account" - The gross face amount of an Account less the discount
offered by you and taken by us.
12.8 "Non-Approved Account" - an Account with respect to which we have either
not issued a credit approval or have subsequently withdrawn a credit
approval as a result of a Dispute or otherwise.
12.9 "Obligations" - All loans, advances, debts, liabilities, obligations,
covenants and duties owing by you to us, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising,
including, without limitation, invoices for goods or services purchased
by you from any company whose accounts are factored or financed by us and
indebtedness arising under any guaranty made by you or issued by us on
your behalf.
SECTION 13. Acceptance
This proposal is submitted to you unsigned and shall constitute an
agreement between us only when signed by us.
Very truly yours,
▇▇▇▇▇▇ FINANCIAL, INC,.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: SVP
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Effective Date: April , 1992
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ACCEPTED AND AGREED TO:
PIVOT CORPORATION
By: /s/ E. ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Title: E. ▇▇▇▇▇▇▇ ▇▇▇▇▇, President
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