Exhibit 10.9
CIT COMMERCIAL SERVICES
300 South Grand Avenue
Los Angeles, California 90071
Date: July 6, 05
American Telecom Services,
Inc.
2466 Peck Road
City of Industry, California
90601
FACTORING
AGREEMENT
Ladies and Gentlemen:
We are pleased to confirm the terms
and conditions that will govern our funds in use accounting,
non-borrowing, notification factoring arrangement with you (the
“ Agreement ”).
1. Sale Of Accounts . You
sell and assign to us, and we purchase as absolute owner, all
accounts arising from your sales of inventory or rendition of
services, including those under any trade names, through any
divisions and through any selling agent (collectively, the “
Accounts ” and individually, an “ Account
”).
2. Credit Approval
.
2.1. Requests for credit approval
for all of your orders must be submitted to our Credit Department
via computer by either: (a) On-Line Terminal Access, or
(b) Electronic Batch Transmission. If you are unable to submit
orders via computer, then orders can be submitted over the phone,
by fax or in writing. All credit decisions by our Credit Department
(including approvals, declines and holds) will be sent to you daily
by a Credit Decisions Report, which constitutes the official record
of our credit decisions. Credit approvals will be effective only if
shipment is made or services are rendered within thirty (30)
days from the completion date specified in our credit approval.
Credit approval of any Account may be withdrawn by us any time
before (a) such time that shipment is made or services are
rendered and (b) title to the goods being sold has passed to
your customer.
2.2. We assume the Credit Risk on
each Account approved in the Credit Decision Report. “
Credit Risk ” means the customer’s failure to
pay the Account in full when due on its longest maturity solely
because of its financial inability to pay. If there is any change
in the amount, terms, shipping date or delivery date for any
shipment of goods or rendition of services (other than accepting
returns and granting allowances as provided in Section 8
below), you must submit a change of terms request to us, and, if
such pertains to a Factor Risk Account, then we shall advise you of
our decision either to retain the Credit Risk or to withdraw the
credit approval. Accounts on which we bear the Credit Risk are
referred to collectively as “ Factor Risk Accounts
”, and individually as a “ Factor Risk Account
”. Accounts on which you bear some or
all of the risk as to credit are referred to
collectively as “ Client Risk Accounts ”, and
individually as a “ Client Risk Account
”.
2.3. We shall have no liability to
you or to any person, firm or entity for declining, withholding or
withdrawing credit approval on any order. If we decline to credit
approve an order and we furnish to you any information regarding
the credit standing of that customer, such information is
confidential and you agree not to reveal same to the customer, your
sales agent or any third party. You agree that we have no
obligation to perform, in any respect, any contracts relating to
any Accounts.
3. Invoicing . You agree to
place a notice (in form and content acceptable to us) on each
invoice and invoice equivalent that the Account is sold, assigned
and payable only to us, and to take all necessary steps so that
payments and remittance information are directed to us. All
invoices, or their equivalents, will be promptly mailed or
otherwise transmitted by you to your customers at your expense. You
will provide us with copies of all invoices (or the equivalent
thereof if the invoices were sent electronically), confirmation of
the sale of the Accounts to us and proof of shipment or delivery,
all as we may reasonably request. If you fail to provide us with
copies of such invoices (or equivalents) or such proofs when
requested by us, we will not bear any Credit Risk as to those
Accounts.
4. Representations And
Warranties .
4.1. You represent and warrant that:
each Account is based upon a bona fide sale and delivery of
inventory or rendition of services made by you in the ordinary
course of business; the inventory being sold and the Accounts
created are your exclusive property and are not, and will not be,
subject to any lien, consignment arrangement, encumbrance or
security interest other than in our favor; all amounts are due in
United States Dollars; all original invoices bear notice of the
sale and assignment to us; any taxes or fees relating to your
Accounts or inventory are solely your responsibility; and none of
the Accounts factored with us hereunder represent sales to any
subsidiary, affiliate or parent company. You also warrant and
represent that: your customers have accepted the goods or services
and owe and are obligated to pay the full amounts stated in the
invoices according to their terms, without dispute, claim, offset,
defense, deduction, rejection, recoupment, counterclaim or contra
account, other than as to returns and allowances as provided in
Section 8 below (the foregoing being referred to in this
Agreement as “ Customer Claims ”).
4.2. You further represent and
warrant that: your legal name is exactly as set forth on the
signature page of this Agreement, you are a duly organized and
validly existing business organization incorporated or registered
in the state of Delaware, and are qualified to do business in all
states where required; the most recent financial statements
provided by you to us accurately reflect your financial condition
as of that date and there has been no material adverse change in
your financial condition since the date of those financial
statements. You agree to furnish us with such information
concerning your business affairs and financial condition as we may
reasonably request from time to time, including financial
statements as of the end of each fiscal year.
4.3. You agree that you will
promptly notify us of any change in your: name, state of
incorporation or registration, location of your chief executive
office, place(s) of business,
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and legal or business structure. Further, you
agree that you will promptly notify us of any change in control of
the ownership of your business organization, and of significant
lawsuits or proceedings against you.
5. Purchase Of Accounts . We
shall purchase the Accounts for the gross amount of the respective
invoices, less: factoring fees or charges, trade and cash discounts
allowable to, or taken by, your customers, credits, cash on account
and allowances (“ Purchase Price ”). Our
purchase of the Accounts will be reflected on the Statement of
Account (defined in Section 10 below), which we shall render
to you, which will also reflect all credits and discounts made
available to your customers.
6. Advances . We do not
expect to advance funds to you prior to the collection of the
Accounts, but we may do so at your request in our sole discretion,
subject to such additional terms and conditions as we may
reasonably request. We have the right, at any time and from time to
time, to hold any reserves we deem reasonably necessary as security
for the payment and performance of any and all of your Obligations
(defined in Section 12 below). All amounts you owe us,
including all advances to you and any debit balance in your Client
Position Account (defined in Section 10 below), and any
Obligations, are payable on demand and may be charged to your
account at any time.
7. Payment Of Accounts
.
7.1. All payments received by us on
the Accounts will be promptly applied to your account with us after
crediting your customer’s account. The Purchase Price for
Accounts with respect to which such remittances have been received
and applied by us during a week, less any amounts due us, will be
transferred and disbursed to you on Thursday of the following week,
or on the next business day thereafter, if said Thursday is not a
business day. No checks, drafts or other instruments received by us
will constitute final payment of an Account unless and until such
items have actually been collected.
7.2. The amount of the Purchase
Price of any Factor Risk Account which remains unpaid will be
deemed collected and will be credited to your account as of the
earlier of the following dates:
(a) the date of the Account’s
longest maturity if a proceeding or petition is filed by or against
the customer under any state or federal bankruptcy or insolvency
law, or if a receiver or trustee is appointed for the customer;
or
(b) the last day of the third month
following the Account’s longest maturity date if such Account
remains unpaid as of said date without the occurrence of any of the
events specified in clause (a) above.
If any Factor Risk Account credited to you was
not paid for any reason other than Credit Risk, we shall reverse
the credit and charge your account accordingly, and such Account is
then deemed to be a Client Risk Account.
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8. Customer Claims And Charge
Backs .
8.1. You must notify us promptly of
any matter affecting the value, enforceability or collectibility of
any Account and of all Customer Claims. You agree to promptly issue
credit memoranda or otherwise adjust the customer’s account
upon accepting returns or granting allowances. For full invoice
credit memoranda, you agree to send duplicate copies thereof to us
and to confirm their assignment to us. We shall cooperate with you
in the adjustment of Customer Claims, but we retain the right to
adjust Customer Claims on Factor Risk Accounts directly with
customers, upon such terms as we in our sole discretion may deem
advisable.
8.2. We may at any time charge back
to your account the amount of: (a) any Factor Risk Account
which is not paid in full when due for any reason other than Credit
Risk; (b) any Factor Risk Account which is not paid in full
when due because of an act of God, civil strife, or war;
(c) anticipation (interest) deducted by a customer on any
Account; (d) Customer Claims; (e) any Client Risk Account
which is not paid in full when due; and (f) any Account for
which there is a breach of any representation or warranty. A charge
back does not constitute a reassignment of an Account. We shall
immediately charge any deduction taken by a customer to your
account.
8.3. We may at any time charge to
your account the amount of: (a) payments we receive on client
risk Accounts which we are required at any time to turnover or
return (including preference claims); (b) all remittance
expenses (including incoming wire charges, currency conversion fees
and stop payment fees), other than stop payment fees on Factor Risk
Accounts; (c) expenses, collection agency fees and
attorneys’ fees incurred by us in collecting or attempting to
collect any Client Risk Account or any Obligation (defined in
Section 12 below); and (d) our fees for handling
collections on client risk Accounts which you have requested us to
process, as provided in the Guide (see Section 18.2
below).
9. Handling And Collecting
Accounts; Returned Goods .
9.1. As owners of the Factor Risk
Accounts, we have the right to: (a) bring suit, or otherwise
enforce collection, in your name or ours; (b) modify the terms
of payment (c) settle, compromise or release, in whole or in
part, any amounts owing, and (d) issue credits in your name or
ours. To the extent applicable, you waive any and all claims and
defenses based on suretyship. If moneys are due and owing from a
customer for both Factor Risk Accounts and Client Risk Accounts,
you agree that any payments or recoveries received on such Accounts
may be applied first to any Factor Risk Accounts. Once you have
granted or issued a discount, credit or allowance on any Account,
you have no further interest therein. Any checks, cash, notes or
other documents or instruments, proceeds or property received with
respect to the Accounts must be held by you in trust for us,
separate from your own property, and immediately turned over to us
with proper endorsements. We may endorse your name or ours on any
such check, draft, instrument or document.
9.2. As owners and assignees of the
Accounts and all proceeds thereof, upon our written notice, you
will, at your expense, comply with our instructions relative to any
and all returned, rejected, reclaimed or repossessed inventory
(“ Returned Goods ”).
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10. Statement Of Account .
After the end of each month, we shall send you certain reports
reflecting Accounts purchased, advances made, if any, fees and
charges and all other financial transactions between us during that
month (“ Reports ”). The Reports sent to you
each month include a Statement of Account reflecting transactions
in three sections: Accounts Receivable, Client Position Account and
Funds In Use. The Reports shall be deemed correct and binding upon
you and shall constitute an account stated between us unless we
receive your written statement of exceptions within
thirty (30) days after same are mailed to you.
11. Grant Of Security
Interest .
11.1. You hereby assign and grant to
us a continuing security interest in all of your right, title and
interest in and to all of your now existing and future (herein
collectively the “ Collateral ”):
(a) accounts (including the Accounts), instruments, documents,
chattel paper (including electronic chattel paper), and any other
obligations owing to you; (b) un
