FORM OF FACTORING AGREEMENT



 






EXHIBIT 10.10


 











 






MONTCAP FINANCIAL CORPORATION

3400 de Maisonneuve Blvd. West

Suite 1245

Montreal, Quebec

H3Z 3B8




FACTORING AGREEMENT (“AGREEMENT”)



DATE: June 18, 2001




	 	 	 	 	 
	TO:
	 	GRAND TOYS LTD. /
	 
	 	JOUETS GRAND LTÉE
	 
	 	1710 Trans Canada Highway
	 
	 	Dorval, Quebec, H9P 1H7
	 
	 
	 	GRAND CONCEPTS INC. /
	 
	 	CONCEPTS GRAND INC.
	 
	 	1710 Trans Canada Highway
	 
	 	Dorval, Quebec, H9P 1H7






You agree to sell and we agree to purchase all of your accounts receivable (the
«Receivables») under the following terms:





	1.	 	The Receivables shall be specifically identified on a Notification Sheet
(see Sample A annexed), or in any other manner and by any means of
notification (including by e-mail or other form of electronic
transmission), agreeable to both of us.
	 
	2.	 	When we issue our Notification Sheet, you will give us a specific
assignment of the Receivables on a form (see Sample B annexed) to which
you will attach a certified copy of the delivery slip, or other proof of
delivery of the order(s) representing the Receivables, together with
relevant invoices. You will also attach the relevant purchase orders, or
service orders, as the case may be. Concurrently, you will certify, on
the Notification Sheet, that each Receivable represents a valid and bona
fide sale; that the goods and/or services represented by the Receivable
have been completely delivered and/or completely rendered; and that, as at
the date of the Notification Sheet, you have had no notice or knowledge of
any dispute (as defined in Clause 3) relating to the Receivable or a
previous or subsequent Receivable, which could cause your customer to
refuse to pay the Receivable on its due date.
	 
	 	 	You warrant that (a) you are a properly constituted
corporation/partnership/sole proprietorship; (b) you are solvent; (c) you
own the goods shipped to the buyer, or (as the case may be) are authorized
or licensed (if a license is necessary) to provide the services, described
in every invoice we purchase. This is an ongoing warranty applicable to
all transactions between us under this Agreement.













 




	 	 	At our request, you will arrange for your customers and any guarantor of
any Receivable to be notified of our purchase of the Receivables in such
form as we may require and/or will obtain an acceptance by your customer
and any guarantor, of our purchase of the Receivables.
	 
	 	 	Every purchase of Receivables includes all accessories and rights of an
unpaid vendor, including all privileges, rights of stoppage in transit,
rights of dissolution and any rights flowing from any guarantees.
	 
	3.	 	«Dispute» means any claims, complaint, offset, defence, counter-account
or counter-claim whatever including without limitation, dispute as to
price, terms, discount, quantity, quality, returns, intended returns or
the rights to return, allowances, claims for credit, deliveries,
warranties, nature of buyer/seller relationship, claims of release from
liability, force majeure or any law or regulations; also the failure or
refusal by your customer to pay the full amount of the Receivable for any
reason whatsoever.
	 
	4.	 	You assume the risk of credit loss on the Receivables at all times and
including, without limitation, the customer’s failure to pay in full at
maturity because of financial inability and guarantee that each Receivable
will be paid in full at maturity in accordance with the contractual
arrangements between you and the customer. Without limiting the
generality of the foregoing and notwithstanding any provision of law to
the contrary, you will be liable for the solvency of a customer not only
at the time of the assignment of a Receivable, but at all times thereafter
so long as the Receivable remains outstanding and such liability will be
to the extent of the full amount of the Receivable.
	 
	5.	 	We will purchase each Receivable at a discount of two percent (2%) from
the face value thereof. In addition to the foregoing you will pay an
additional fee to us equal to one-fifteenth (1/15) of one percent (1%) per
day on any receivable outstanding after thirty (30) days from the purchase
date.
	 
	 	 	In the event that the Prime Rate of The Bank of Nova Scotia increases
above six and one-half percent (6.5%) per annum, our discount will
increased by 0.125 times the amount of such increase. The Bank of Nova
Scotia Prime Rate means the prime lending rate in effect from time to time
as a reference for loans in Canadian dollars.
You have paid to us upon signature of the offer dated May 15, 2001, an
amount of ONE THOUSAND DOLLARS ($1,000.00), as a deposit to be applied
against legal, appraisal and due diligence fees.
You will pay to us on the sooner of signature of this agreement or
approval of our credit committee, the sum of TEN THOUSAND DOLLARS
($10,000.00), representing our application fee.
	 
	6.	 	We will pay you the purchase price for each Receivable upon collection
thereof by us, which payment should be subject to deduction by an equal
amount of any deductions which may be taken by the customer. We will
also deduct from the purchase price any other amounts which may be owing
by you to us at such time.
	 
	7.	 	We may prepay the purchase price of eligible Receivables up to a maximum
of Eighty Percent (80%) , less any deductions which may be taken by the
customer in accordance with the invoice or purchase order or vendor
agreement.
	 
	 	 	Eligible Receivables mean your accounts receivable represented by invoices
to customers which have been credit approved by us and which customers
have acknowledged a direction to make payment directly to us. As well in
order for a receivable to be eligible for purchase by us, original
invoices, purchase orders and proof of shipments shall be provided by you
to Montcap. Montcap will mail the original invoices to customers at your
cost.
	 
	 	 	We will also deduct from the amounts payable to you the cost of
publication (registration) and notification of the hypothec granted by you
to us and the cost of any courier services.
	 
	8.	 	Each and every Receivable is, and will be clear of any liens, rights of
third parties, or other charges.
	 
	 	 	Without prejudice to our rights as a purchaser of the Receivables, we
will also hold all of your accounts receivable as security for the payment
and fulfilment of all of your indebtedness and obligations to us from time
to time. For such purposes, you will hypothecate your accounts receivable
in our favour in our standard form.














 




	9.	 	All reasonable legal fees and disbursements incurred by us in connection
with this Agreement and security documents hereunder shall be paid by you
at the time of closing or, at our sole discretion, deducted from such
amounts due you. You shall also pay all bank, wire and cable charges at
$20.00 per transfer and we may deduct such amounts from amounts payable by
us to you.
	 
	10.	 	You agree that you will not, without our prior written consent, accept
any change to any payment terms (as certified on the Notification Sheet)
relating to any Receivable. In the event that any payment terms are
changed without our prior written consent, we may, in our sole discretion,
either require you to immediately repurchase the Receivable for a price
equal to the outstanding amount thereof or may charge you a further
discount of five percent (5%) for each period of thirty (30) days, or
portion thereof, for which the payment terms were extended.
	 
	11.	 	Should any Dispute occur, or should you breach any provision hereof or
should any representation or warranty made herein or in any Notification
sheet or otherwise in respect of any Receivable be false or misleading, or
should any customer fail to pay within ninety (90) days of invoice date,
you will immediately, at our request, repurchase the Receivable for a
price equal to the outstanding amount thereof. You will notify us
immediately if a customer returns or desires to return any merchandise
representing the whole or any part of a Receivable, or if the customer in
any way alleges any Dispute. You will promptly adjust any Dispute and
will advise us of all adjustments.
Upon demand, you will reimburse us all legal and collection fees relating
to the Receivables and we may deduct such amounts from any amounts owing
by us to you in connection with the purchase of any Receivable.
	 
	 	 	In the event that pursuant to this Agreement you are obliged at any time
to repurchase any Receivable, you will forthwith pay to us the amount of
the Receivable. Any unpaid balance will bear interest at the Prime Rate of
interest of the Bank of Nova Scotia in effect from time to time plus ten
percent (10%) per annum, calculated on a daily basis and charged monthly.
Interest will be payable on the last day of each month.
	 
	12.	 	You irrevocably appoint us or any person designated by us your lawful
attorney for all collection matters relating to the Receivables, and,
without limiting the scope of this appointment, we have the right to
endorse your name on all payment instruments, verifications of account,
notices to customers, and similar documents, to send to any customer in
your name or ours requests for verification or payment of accounts; to
draw and/or confirm acceptance of drafts; to sue for, recover and receive
all monies due, owing and payable under each Receivable; and otherwise
collect such accounts in whatever manner we see fit, including the right
to make compromises and settlements with your customers, to attend and
vote in your name or ours at all meetings of creditors, to file proofs of
claim and generally to perform any acts necessary or expedient for the
purpose of collecting the Receivable. You will remit to us forthwith, and
in the same form as received, all payments and evidences of payment
received from your customers representing payment of Receivables, and any
other communications from your customers relating to any Receivables.
	 
	13.	 	We may accept payments on account from customers, and deposit remittances
as received, irrespective of any deductions or notations, the whole
without affecting or reducing your liability to us in respect of any
amounts not paid by the customer.
	 
	 	 	Any payments received by us from or on behalf of a customer with more than
one outstanding Receivable may be applied by us against such Receivables
owing by that customer as we consider appropriate notwithstanding any
allocation made by the customer.
	 
	14.	 	You will provide us, within one hundred and twenty (120) days after the
end of each fiscal year, your annual financial statements and you hereby
authorize your accountant , from time to time, to furnish copies,
certified by him, of all such statements together with any certificates or
extracts of your books and records as we may reasonably request. Any of
our representatives may, from time to time, examine and make copies or
extracts of your books and records, which you agree to make available to
us during business hours.














 




	15.	 	This Agreement is for the benefit of and will bind us, and our respective
successors and assigns. We have made no representations to induce you to
enter into this Agreement other than those which may appear herein. No
amendment or waiver of any provision of this Agreement will be effective
unless it is in writing and signed by us.
	 
	16.	 	This Agreement will continue for an indefinite period of time from the
date hereof and unless one of us receives from the other by registered
mail a notice of termination of no less than thirty (30) days.



You guarantee to us that discount revenue generated from this contract for us
will be no less than SIXTY THOUSAND DOLLARS ($60,000.00). In the event that the
discount revenue earned is less when this agreement is terminated, then you
will pay us, on demand, the difference between SIXTY THOUSAND DOLLARS
($60,000.00) and the discount revenue actually generated during the period that
this agreement was in force. The aforesaid minimum discount fee shall be
payable to us as liquidated damages and will be validly due and owing to us
even if you should seek the protection of any insolvency legislation, go into
liquidation or may otherwise cease to carry on business.





	17.	 	You hereby agree that we may use your name and other information
pertaining to our financial arrangements including, without limitation,
the amount of the facility, for marketing and advertising purposes and you
hereby agree not to invoke the confidentiality of the financing
arrangements entered into between us, provided said information is being
used for said purposes. We agree to keep confidential the terms of our
financing arrangements and your financial information, except to the
extent permitted in the previous sentence and as regard disclosures in the
ordinary course of our business.
	 
	18.	 	Time, wherever material, shall be of the essence. This Agreement shall
be governed by the laws of Quebec. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction will not invalidate the
remaining provisions, nor will it invalidate or render unenforceable such
provision in any other jurisdiction.
	 
	19.	 	Upon every reasonable request from us, you will sign such further
documents and do such further acts as may be required in order to give
effect to the purpose and intent of this Agreement.
	 
	20.	 	This agreement may be referred to as bearing formal date of June 18,
2001, notwithstanding the actual date of its execution.
	 
	21.	 	The parties acknowledge that they have required that this agreement and
all related documents be drawn up in English.
	 
	 	 	Les parties reconnaissent avoir exigé que la présente convention et tous
les documents connexes soient rédigés en anglais.



MONTCAP FINANCIAL CORPORATION



Per: ______________________________