Document:

EX-10.16

 

Exhibit 10.16

ON-GOING PURCHASE AGREEMENT

This agreement, made the 26th day of April 2005, by and between Shopsmith Inc. (hereinafter called
the Seller), and Great Lakes Financial, LLC (hereinafter called the Buyer).

	1.	 	I consideration of $1,138,721.37, the Seller hereby sells, assigns, transfers and conveys to
the Buyer, all those revolving contracts, credit agreements, invoices, indebtedness, or other
obligations and any instruments securing same (herein called Receivables) which are listed in
Schedule A attached hereto and made part hereof, except any thereof which shall have been paid
to the Seller in full on or after 4/25/05. The above purchase price shall be payment for all
records and files relating to said Receivables.

	2.	 	With respect to the above Receivables, the Seller warrants that:

	 	a.	 	It has complied with all applicable federal, state and local laws and regulations,
including but not limited to all applicable fair lending laws and regulations.
	 
	 	b.	 	It owns outright and has full title to all Receivables, free and clear of all claims,
liens, pledges and other encumbrances of any kind whatsoever.
	 
	 	c.	 	It has full power and authority to sell, assign, transfer and convey the Receivables to
the Buyer, and all other necessary proceedings on the part of the Seller have been duly
taken to authorize the sale.
	 
	 	d.	 	All of the Receivables, together with any instruments securing the same, were made for
valuable considerations and now constitute valid and legally enforceable obligations of the
respective persons shown as indebted thereon. All payments shown on the records relating
to the Receivables were made on the date indicated on the said records and were actually
made by the persons shown as indebted with respect to the Receivables.
	 
	 	e.	 	There are no claims or defenses with respect to the Receivables, including but not
limited to set-offs, counterclaims, right of cancellation, lack of consideration, fraud,
forgery and alteration.
	 
	 	f.	 	The amounts shown on Schedule A or any other data provided by Seller to Buyer to be
owing and unpaid on the respective Receivables represent the true and correct outstanding
balances thereon at the date of this Agreement.
	 
	 	g.	 	The information concerning the Receivables and the security therefore and the person
shown indebted thereon which has been furnished by the Seller to the Buyer is correct.
	 
	 	h.	 	All taxes of any nature or description whatsoever relating to the Receivables have been
paid in full.
	 
	 	i.	 	There are no judgements against Seller or any pending litigation, suit, or claim which
could become a lien against the Receivables.
	 
	 	j.	 	The Receivables represent less than 75% of the Sellers total assets as of the date of
this Agreement.

Seller agrees that if any warranty herein is breached (other than a breach of subparagraph (j)
or if any claim of defense is asserted against Buyer arising out of any Receivable, Seller will
repurchase such Receivable on demand for the then unpaid balance due thereon, and Seller further
agrees to reimburse Buyer for any and all damages and costs which Buyer may sustain as a result
of Seller’s breach of any warranty herein.

	3.	 	It is understood that certain customers of Seller whose Receivables are sold and transferred
to Buyer hereunder, have in effect policies of credit life and/or accident and health
insurance in connection with their accounts, and/or property insurance on property given as
security for these accounts, which, in the event of cancellation by prepayment or otherwise,
may result in a refund of unearned premium to the insured obligator. In this connection,
Seller shall make all refunds and handle all claims. If any policies must be cancelled as a
result of this transaction, Seller will cooperate with Buyer in sending any required notices
to customers.

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	4.	 	It is hereby agreed that the Buyer does not assume or incur and shall not in any manner
become liable for any debt, obligation, or liability of the Seller.

	5.	 	Seller consents to permit Buyer to advise the debtors who are obligated on the Receivables
that it has purchased such Receivables and that all payments thereon should be made to the
Buyer. Seller agrees to report the transfer of each Receivable from Seller to Buyer to all
credit bureaus to which it reports account information on the Receivables.

	6.	 	Seller hereby constitutes and appoints Buyer the true and lawful attorney-in-fact of the
Seller with full power of revocation and substitution in the name and stead of the Seller, but
on behalf of and for the benefit of the Buyer, to do any and all of the following:

	 	a.	 	To endorse the name of the Seller upon checks, drafts, notes, powers and other forms of
exchange received in payment on any of the Receivables.
	 
	 	b.	 	To demand, collect, and receive any and all of the Receivables, to enforce any of the
rights in respect thereof, to give receipts and releases for and in respect of the same, to
do all acts necessary to perfect in Buyer’s name any liens or security interests in real or
personal property held as security for the Receivables by the Seller.
	 
	 	c.	 	To institute and prosecute in the name of the Seller or otherwise at the expense and
for the benefit of the Buyer, its successors and assigns, any and all proceedings at law,
in equity or otherwise which Buyer, its successors or assigns, may deem proper for the
collection and enforcement of any claim or right of any kind hereby granted, bargained,
sold, assigned and transferred.

	7.	 	Seller further agrees that any payments received by the Seller on said Receivables that have
not been posted prior to computation of the Purchase Price shall be turned over and delivered
to the Buyer at the time of consummation of this Agreement, or the Buyer may deduct from the
aggregate purchase price the amount of any such payments. If such payments are received by
Seller after this Agreement is consummated. Seller shall immediately turn them over to Buyer.

	8.	 	The purchase and sale contemplated by this Agreement may be subject to the approval of
certain regulatory authorities, and if so, Seller agrees to obtain such approval prior to the
date of closing; otherwise, this Agreement shall be void at Buyer’s sole option.

	9.	 	It is understood that the Receivables covered by this Agreement have been pledged to N/A
(Lender) to secure a portion of Seller’s indebtedness to Lender. It is also understood that
in lieu of paying the amounts specified in paragraph 1 above to Seller, Buyer shall pay such
amount by check jointly to Seller and lender in partial satisfaction of Seller’s indebtedness
to Lender, and Seller will make arrangements to procure the release (including reassignment of
individual Receivables deemed necessary to Buyer to effectuate said release) of the
Receivables pledged to Lender in a manner and form satisfactory to Buyer and will insure their
physical delivery to Buyer at the date of closing; otherwise, this Agreement shall be void at
Buyer’s sole option.

	10.	 	Buyer and Seller contemplate that Seller may offer additional obligations for sale to Buyer
in the future. If Buyer agrees to pay such additional obligations, the purchase and sale
shall be in accordance with the terms and conditions of this Agreement and shall be evidenced
by a Short Form Purchase Agreement in substantially the form attached hereto as Exhibit A.

	 	 	 
	Shopsmith, Inc. (Seller)

	 	Great Lakes Financial LLC (Buyer)
	 
	 	 
	By: /s/ Mark May

	 	By: /s/ Larry Katzovitz
	 
	 	 
	Title: VP

	 	Title:

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Exhibit A

Short Form Purchase Agreement

Seller: Shopsmith

Buyer: Great Lakes Financial, LLC

Date: 4/26/05

Number of Receivables Purchased/Sold: 614

Purchase Price: $ 1,138,721.37

Reserve Holdback (if any) $ 0

Payment to Seller: $ 1,138,721.37

This purchase and sale is made pursuant to the terms and conditions of Purchase Agreement made
4/26/05, between Buyer and Seller, which is incorporated into this Short Form Purchase Agreement by
reference, except that the Receivables purchased and sold pursuant to this Short Form Purchase
Agreement are identified at Schedule A attached to this Short Form Purchase Agreement.

	 	 	 
	Shopsmith, Inc. (Seller)

	 	Great Lakes Financial LLC (Buyer)
	 
	 	 
	By: /s/ Mark May

	 	By: /s/ Larry Katzovitz
	 
	 	 
	Title: VP

	 	Title:

Page 41EX-10.17

 

Exhibit 10.17

AGREEMENT

This Agreement (“Agreement”) is entered into by and between Citizens Finance Company, an Illinois
corporation (“CFC”) with its principle place of business in Elmhurst, Illinois, and Shopsmith,
Inc., an Ohio corporation (“SSI”) with its principle place of business in Dayton, Ohio.

Whereas SSI regularly sells woodworking equipment and services incidental thereto to Obligors on a
revolving or retail installment sales contract (“Contract”), CFC and SSI desire by this Agreement
to establish a framework under which CFC may, from time to time, purchase said Contracts form SSI.
In consideration of the mutual agreements contained in this Agreement, CFC and SSI agree as
follows:

	(1)	 	A credit application concerning Obligors will be completely and accurately obtained by SSI.
A Contract will describe Obligor’s rights and obligations with respect to all purchases made
from Provider on such Contract.
	 
	(2)	 	Prior to CFC’s acceptance of a Contract for purchase, SSI and CFC will mutually agree on the
price to be paid by CFC for the Contract (“Purchase Price”), said Purchase Price to be
evidenced by CFC’s Program Outline Letter and Schedule “A” thereto, the “CFC/SSI Credit
Matrix”. Such Contract shall become a “Purchased Contract” for the purpose of this Agreement.
	 
	(3)	 	Throughout the term of this Agreement, SSI will maintain status as an Ohio corporation in
good standing, qualified to do business in each state in which doing business.
	 
	(4)	 	As required by state law, SSI and all appropriate employees of SSI will be properly licensed
to conduct business contemplated by this Agreement.
	 
	(5)	 	SSI will maintain unrestricted authority to sell Contracts to CFC in accordance with this
Agreement, and its board of directors will do everything necessary to authorize SSI to
properly sell Contracts to CFC, including the execution and delivery of all collateral
instruments securing payment of said Contracts and any other appropriate instruments.
	 
	(6)	 	SSI will own the Contracts it offers to sell to CFC, free of any claims, liens, security
interests, charges, or other encumbrances.
	 
	(7)	 	Each purchased Contract, including all charges or other amounts included, will be a binding
indebtedness arising from a good faith sale as described in said Contract to the Obligors(s)
and that the services sold will be used by the Obligor(s), unless otherwise indicated by SSI.
	 
	(8)	 	Each Purchased Contract will be incurred for legally sufficient consideration, and all
obligations of guarantors, sureties, and other primary and secondary obligors with respect to
any and all such Contracts will be validly incurred for legally sufficient consideration and
constitute binding obligations of such guarantors, sureties, and other primary and secondary
obligors, respectively.
	 
	(9)	 	There will be no effective legal or equitable defenses, setoffs, or counterclaims against any
Purchased Contract.
	 
	(10)	 	No Contract will be sold by SSI to a secondary lender prior to be offered to CFC.
	 
	(11)	 	No obligations with respect to Purchased Contracts will be obtained or induced by fraud,
false or misleading representations, unfair or deceptive trade practices, or other unlawful
conduct.
	 
	(12)	 	Credit information concerning Obligor will be obtained by SSI on an appropriate form in
compliance with state and federal law. Credit information will be filled in and reported to
CFC completely and accurately.
	 
	(13)	 	Each Purchase Contract and all fees or other charges to be included in the amount financed
will comply with the requirements of all applicable laws, and SSI will complete all necessary
acts with respect to compliance of Purchased Contracts.
	 
	(14)	 	No agreement will exist where any provision of a Purchased Contract may be varied in any way.

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	(15)	 	The down payment shown in a Purchased Contract will have been actually been made in cash or
it’s equivalent by Obligor to Provider, and no part will have been, directly or indirectly,
advanced by SSI or Provider.
	 
	(16)	 	All Providers that originate Purchased Contracts will have a valid Purchase Agreement with
SSI. If SSI makes changes to its Purchase Agreement, SSI agrees to notify CFC of said
changes.
	 
	(17)	 	SSI will, within ten (10) business days of its receipt, provide CFC with a copy of any
written complaint from any Obligor relating to any Purchased Contract.
	 
	(18)	 	Any Purchased Contract assigned by an employee or agent of SSI will convey full and legal
ownership of such Contract and CFC is entitled to rely on such authority.
	 
	(19)	 	SSI will deliver to CFC the original of the fully-executed Purchase Contract, credit
information, and related documents, properly assigned, and authorizes CFC to insert its name,
or the name of any other assignees, in the space provided therefore in the assignment clause
of such Contracts, and to return to SSI all Contracts not purchased.
	 
	(20)	 	SSI will hold in trust and deliver within three (3) business days to CFC, in the form
received, all payments received by SSI applicable to Purchased Contracts. If SSI fails to
deliver any such payment, it will pay CFC on demand, as liquidated damages, an additional sum
equal to five percent (5%) of the amount of such payment.
	 
	(21)	 	If any of the agreements above are not true as to any Purchased Contract, SSI agrees to
purchase on demand from CFC said Contract for the lesser of (a) its current net balance, or
(b) its Purchase Price. If Obligor under any Contract declines to pay CFC any amount due on a
Purchased Contract on any ground which, if established, would be in violation of any agreement
made by SSI with respect to such Contract, CFC may require the repurchase of the Contract by
SSI by submitting to SSI a written statement stating the grounds on which Obligor has declined
to pay. Within 15 days after receipt of such statement, SSI shall either (a) repurchase such
Contract from CFC for the lesser of (i) its current net balance, or (ii) its Purchase Price,
or (b) furnish CFC a written statement that there is no such ground for non-payment, or that
same has been corrected. Within 5 business days after its receipt of such repurchase payment,
CFC will reassign and deliver such Contract to SSI, without recourse to CFC, and without
representation or warranties, express or implied.
	 
	(22)	 	In the event SSI becomes insolvent, executes an assignment for the behalf of creditors, or is
a party to any action, voluntary or involuntary, under the National Bankruptcy Act, CFC may,
at its option, demand immediate purchase by SSI of all Purchased Contracts then in CFC’s
possession for the current net balances thereof.
	 
	(23)	 	If CFC employs legal counsel, other than a salaried employee, to collect any liquidated
damages or the repurchase price due from SSI, CFC may charge to SSI its actual expense for
such reasonable collection expenses and attorneys fees.
	 
	(24)	 	SSI will furnish to CFC for its approval copies of forms for Contracts and credit
applications presently used by SSI. SSI will continue to use such forms for transactions that
will be offered to CFC, and will not change forms without prior approval of CFC.
	 
	(25)	 	Generally, CFC will approve for purchase all Contracts submitted to it for purchase by SSI
that are in compliance with guidelines established in CFC’s Program Outline Letter. However,
CFC reserves to itself entire discretion and freedom as to its approval for purchase of any
Contract, said approval not to be unreasonably withheld.
	 
	(26)	 	CFC may, without affecting SSI’s agreements herein, change, modify, extend, or renew the
dates or amounts of the periodic installment payments in any Purchased Contract.
	 
	(27)	 	SSI will comply with state and federal laws relating to credit applications, including the
Fair Credit Reporting Act and the Equal Credit Opportunity Act. When applying for credit,
customers will be given any notice required by state law. SSI will keep written complaints
and a log of oral complaints of Equal Credit Opportunity Act violations for 25 months.

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	(28)	 	SSI will indemnify CFC and hold it harmless from and against all loss, cost, damage, adn
expense, including reasonable attorneys’ fees, at any time incurred because of (a) any
liability of SSI or any action at any time taken or omitted to be taken by SSI, or (b) any
breach or falsity of any agreement in this Agreement.
	 
	(29)	 	SSI will indemnify CFC and hold it harmless from and against all loss, cost, damage and
expense, including reasonable attorneys’ fees, at any time incurred by CFC because of any
violation of state or federal law or regulation, or other illegal or actionable conduct (a)
resulting from the documents used by SSI in connection with the transaction, including, but
not limited to, documents given to the Obligor pertaining to credit disclosures, credit
applications, and Contract forms, or (c) resulting from any liability CFC incurs by reason of
notice included on Contract which is required by Federal Trade Commission regulation regarding
Buyers’ Claims and Defenses. However, SSI’s liability for sufficiency of document contents
does not apply to any document provided to SSI by CFC or approved for SSI’s use under this
agreement by CFC, but shall apply to any other failures or omissions by SSI related to any
such document furnished or approved by CFC, including, but not limited to, SSI’s failure in
completing such document, or properly delivering copies to Obligor(s).
	 
	(30)	 	SSI will not indemnify CFF, nor hold it harmless from and against any loss, cost, damage, or
expense at any time incurred because of any liability of a Provider, or from any health care
professional performing or assisting in the performance of Health Care Services. However, in
the event that a claim or action is brought against CFC that arises out of a Provider’s
action, or from any health care professional performing or assisting in the performance of
Health Care Services, SSI will extend to CFC, without limitation, its rights under it’s
Purchase Agreement with Providers.
	 
	(31)	 	CFC will execute a daily funding to SSI of the Purchase Price payments of Purchased Contracts
submitted to CFC on all complete Contracts that have been telephone verified with the Obligor
the previous day, except when a funding day is on a holiday or CFC is closed, in which case,
CFC will execute funding on the next business day.
	 
	(32)	 	Either CFC or SSI may terminate this Agreement upon 90 days prior written notice to the
other.
	 
	(33)	 	SSI hereby sells, assigns, and transfers to CFC all right, title, and interest in and to all
Purchased Contracts, and all other instruments reflecting sales or charges made pursuant
thereto, made under this Agreement, and authorizes CFC to do every act and thing necessary to
collect and discharge same, including the right to endorse any check or draft made payable to
SSI in connection with said Purchased Contracts, and to take, in SSI’s name or otherwise, all
such legal or other proceedings as SSI might have taken, but for this assignment. CFC is now
and hereafter authorized and empowered to execute all documents relating to Purchased
Contracts on behalf of and in the name of SSI and is expressly empowered and authorizes to
assign and endorse on behalf of SSI any and all instruments necessary in the ordinary and
usual course of business which are appropriate to carry out the intent of this Agreement. CFC
has the right to assign its title and right to said Purchased Contracts at any time.

CFC’s acceptance of this proposal constitutes the foregoing Agreement between SSI and CFC, which
will inure to the benefit of and bind their respective heirs, successors, and assigns.

SHOPSMITH, INC. (SSI)

By: /s/ Mark May

Title: VP

Attest:

Date: 4-26-05

CFC acknowledges receipt of this Agreement, will rely on the agreements, representations, and
warranties contained herein when purchasing Contracts from SSI, and will perform its agreements as
set forth herein.

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CITIZENS FINANCE COMPANY

By: /s/ Larry Katzovitz

Title: Pres.

Attest:

Date: 4-26-05

Page 45

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