Document:

Unassociated Document

 

FACTORING AND SECURITY AGREEMENT

 

THIS FACTORING AND SECURITY AGREEMENT is made as of March 22, 2013 by and between BioZone Laboratories, Inc., a California corporation (“Seller”) and Midland American Capital Corporation, a Nevada corporation (“Purchaser”).

 

1.  Definitions and Index to Definitions.  The following terms used herein shall have the following meaning.  All capitalized terms not herein defined shall have the meaning set forth in the UCC:

 

1.1.  “Acceptable Forums” – See Section 29.1. hereof.

 

1.2.  “Active Account Debtor” – An Account Debtor of Seller which owes a Purchased Account to Purchaser.

 

1.3.  “Advance Rate” – 80%.

 

1.4.  “Avoidance Claim” – Any claim that any payment received by Purchaser is avoidable under the Bankruptcy Code or any other debtor relief statute.

 

1.5.  “Base Fees” – The Initial Fee and the Factoring Fee.

 

1.6.  “Chosen State – Nevada.

 

1.7.  “Clearance Days”  – One business days for checks drawn on banks located within the Chosen State and for electronic funds transfers, and three business days for all other payments.

 

1.8.  “Closed” – A Purchased Account is closed upon receipt of full payment by Purchaser from a Payor or from the Seller (including its being charged to the Reserve Account).

 

1.9.  “Collateral”- All Seller’s now owned and hereafter acquired Accounts, Chattel Paper, Inventory, Equipment, Instruments, Investment Property, Documents, Letter of Credit Rights, Commercial Tort Claims, and General Intangibles.

 

1.10.  “Complete Termination” – Complete Termination occurs upon satisfaction of the following conditions:

 

1.10.1.  Payment in full of all Obligations of Seller to Purchaser;

 

1.10.2.  If Purchaser has issued or caused to be issued guarantees, promises, or letters of credit on behalf of Seller, acknowledgement from any beneficiaries thereof that Purchaser or any other issuer has no outstanding direct or contingent liability therein.

 

1.10.3.  Seller has executed and delivered to Purchaser a general release in the form of Exhibit 1.10.3. attached hereto.

 

  

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1.11.  “Early Termination Date” – See Section 20 hereof.

 

1.11.1.  “Early Termination Fee” – None (waived)

 

1.12.  “Eligible Account” – An Account that is acceptable for purchase as determined by Purchaser in the exercise of its reasonable sole credit or business judgment.

 

1.13.  “Events of Default” – See Section 17.3.

 

1.14.  “Existing Equipment Liens” – The liens and security interests described in Exhibit 1.14 hereto.

 

1.15.  “Expedited Funding Fee” – $35.00.

 

1.16.  “Exposed Payments” – Payments received by Purchaser from or for the account of a Payor that has become subject to a bankruptcy proceeding, to the extent such payments cleared the Payor’s deposit account within ninety days of the commencement of said bankruptcy case.

 

1.17.  “Face Amount” – The face amount due on an Account at the time of purchase, less Purchaser’s estimate of adjustments that will be taken by Account Debtor including but not limited to adjustments for returns and stocking fees.

 

1.18.  “Factoring Fee” – The Factoring Fee Percentage multiplied by the Face Amount of a Purchased Account, for each Factoring Fee Period or portion thereof, that any portion thereof remains unpaid, computed from the end of the Initial Fee Period to and including the date on which a Purchased Account is Closed.

 

1.19.  “Factoring Fee Percentage” – 0.833%.

 

1.20.  “Factoring Fee Period” – 10 days.

 

1.21.  “Future Equipment Lien” – Any lien created on or after the date hereof on Equipment hereafter acquired by Seller.

 

1.22.  “Initial Fee” – 2.500% of the Face Amount.

 

1.23.  “Initial Fee Period” – 30 days from the Purchase Date.

 

1.24.  “Insolvency Date” – The date on which an Account Debtor becomes Insolvent.

 

1.25.  “Insolvent” – An Account Debtor has become Insolvent if it becomes the subject of a bankruptcy proceeding, at all other relevant times an Account Debtor is not Insolvent.

 

1.26.  “Invoice” – The document that evidences or is intended to evidence an Account.  Where the context so requires, reference to an Invoice shall be deemed to refer to the Account to which it relates.

 

  

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1.27.  “Late Charge” – 0.25% per day.

 

1.28.  “Late Payment Date” – seventy-five days from the date on which a Purchased Account was Purchased.

 

1.29.  “Maximum Amount” – $1,500,000.

 

1.30.  “Minimum Advance Amount” – $1,000.

 

1.31.  “Minimum Funding Fee” – $125.

 

1.32.  “Misdirected Payment Fee”  – 15%  of the amount of any payment (but in no event less than $1,000) on account of a Purchased Account (and, after the occurrence of an Event of Default, payments on accounts of any Account) which has been received by Seller and not delivered in kind to Purchaser on or before two business days following the date of receipt by Seller, or 30% of the amount of any such payment which has been received by Seller as a result of any action taken by Seller to cause such payment to be made to Seller.

 

1.33.  “Missing Notation Fee” – 15%  of the Face Amount.

 

1.34.  “Obligations” – All present and future obligations owing by Seller to Purchaser whether arising hereunder or otherwise, and whether arising before, during or after the commencement of any bankruptcy case in which Seller is a Debtor.

 

1.35.  “Parties” – Seller and Purchaser.

 

1.36.  “Payor” – An Account Debtor or other obligor on an Account, or entity making payment thereon for the account of such party.

 

1.37.  “Permitted Liens” – Liens and security interests held by Lender, liens and security interests held by Subordinating Creditors, the Existing Equipment Liens, any Future Equipment Liens authorized by Purchaser pursuant to Section 8.2. hereof, and liens securing the claims or demands of materialmen, mechanics, carriers, warehousemen, and other like persons not yet due.

 

1.38.  “Purchase Date” – The date on which Seller has been advised in writing that Purchaser has agreed to purchase an Account.

 

1.39.  “Purchase Price” – The Face Amount of a Purchased Account less the Initial Fee.

 

1.40.  “Purchased Accounts” – Accounts purchased hereunder which have not been Closed.

 

1.41.  “Repurchased” – An Account has been repurchased when Seller has paid to Purchaser the then unpaid Face Amount.

 

1.42.  “Repurchased Account” – See Section 7.1.2. hereof.

 

  

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1.43.  “Required Reserve Amount” – The Reserve Percentage multiplied by the unpaid balance of Purchased Accounts

 

1.44.  “Reserve Account” – A bookkeeping account on the books of the Purchaser representing the portion of the Purchase Price which has not been paid by Purchaser to Seller, maintained by Purchaser to ensure Seller’s performance with the provisions hereof.

 

1.45.  “Reserve Percentage” – 20%.

 

1.46.  “Reserve Shortfall” – The amount by which the Reserve Account is less than the Required Reserve Amount.

 

1.47.  “Schedule of Accounts” – A form supplied by Purchaser from time to time wherein Seller lists such of its Accounts as it requests that Purchaser purchase under the terms of this Agreement.

 

1.48.  “Subordinating Creditors” -

 

1.49.  “Term” – A one year period, computed from the date hereof.

 

1.50.  “Termination Date” – The earlier of (i) the Early Termination Date, or (ii) the end of the last Term which was not followed by an extension or renewal under Section 20. hereof.

 

1.51.  “UCC” – The Uniform Commercial Code as adopted in the Chosen State.

 

2.  Sale; Purchase Price; Billing

 

2.1.  Assignment and Sale.

 

2.1.1.  Seller shall offer to sell to Purchaser as absolute owner, with full recourse, such of Seller’s Accounts as are listed from time to time on Schedules of Accounts.

 

2.1.2.  Upon purchase, Purchaser will assume the risk of non-payment on Purchased Accounts, so long as (i) the cause of non-payment is solely due to an Account Debtor becoming Insolvent, and (ii) the Account Debtor is not an Affiliate of Seller.

 

2.1.3.  Each Schedule of Accounts shall be accompanied by such documentation supporting and evidencing the Account, as Purchaser shall from time to time request.

 

2.1.4.  Purchaser may, but need not purchase from Seller such Accounts as Purchaser determines to be Eligible Accounts.

 

2.1.5.  Purchaser does not intend to purchase any Account which will cause the unpaid balance of Purchased Accounts to exceed the Maximum Amount .

 

  

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2.1.6.  Purchaser shall pay the Purchase Price, of any Purchased Account, less any amounts due to Purchaser from Seller,  within one business day of the Purchase Date, whereupon the Accounts shall be deemed purchased hereunder.  In the event that Seller requests payment of the Purchase Price on the Purchase Date, Seller shall immediately pay the Expedited Funding Fee to Purchaser.

 

2.1.7.  Notwithstanding anything to the contrary contained herein, Purchaser shall not make any payment to Seller in an amount less than the Minimum Advance Amount, except upon the request of Seller, whereupon Seller shall pay the Minimum Funding Fee to Purchaser.

 

2.2.  Billing.  Purchaser may send a monthly statement to all Payors itemizing their account activity during the preceding billing period.  All Payors will be instructed to make payments to Purchaser.

 

3.  Reserve Account.

 

3.1.  Seller shall pay to Purchaser on demand the amount of any Reserve Shortfall.

 

3.2.  Purchaser shall, from time to time, pay to Seller any amount by which the Reserve Account exceeds the Required Reserve Amount, but in no event less frequently than weekly, except upon termination of this Agreement or upon the occurrence of any Event of Default, whether or not cured or waived, in which case the frequency of paying to Seller the difference between the Reserve Account and the Required Reserve Amount shall be at the discretion of Purchaser.

 

3.3.  Purchaser may charge the Reserve Account with any Obligation.

 

3.4.  Purchaser may pay any amounts due Seller hereunder by a credit to the Reserve Account.

 

3.5.  On the Insolvency Date, Purchaser shall credit the Reserve Account with the unpaid Purchase Price of a Purchased Account (other than a Repurchased Account) owed by an Insolvent Account Debtor.

 

3.6.  Purchaser shall purchase from Seller any Repurchased Account on the Insolvency Date.

 

3.7.   Concurrently with   Complete Termination, Purchaser shall pay to Seller the amounts remaining in the Reserve Account, if any.

 

4.  Exposed Payments.

 

4.1.  With respect to Purchased Accounts repurchased pursuant to Section 7.1.1., upon termination of this Agreement Seller shall pay to Purchaser (or Purchaser may retain), to hold in a non-segregated non-interest bearing account the amount of all Exposed Payments (the “Preference Reserve”).

 

  

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4.2.  Purchaser may charge the Preference Reserve with the amount of any Exposed Payments that Purchaser pays to the bankruptcy estate of the Payor that made the Exposed Payment, on account of a claim asserted under Section 547 of the Bankruptcy Code.

 

4.3.  Purchaser shall refund to Seller from time to time that balance of the Preference Reserve for which a claim under Section 547 of the Bankruptcy Code can no longer be asserted due to the passage of the statute of limitations, settlement with the bankruptcy estate of the Payor or otherwise.

 

5.  Authorization for Purchases.

 

5.1.  Subject to the terms and conditions of this Agreement, Purchaser is authorized to purchase Accounts upon telephonic, facsimile or other instructions received from anyone purporting to be an officer, employee or representative of Seller.

 

6.  Fees and Expenses.  Seller shall pay to Purchaser:

 

6.1.  Factoring Fee.  The Factoring Fee on the date on which a Purchased Account is Closed.

 

6.2.  Misdirected Payment Fee.  Any Misdirected Payment Fee immediately upon its accrual.  It is recognized that the costs imposed upon Purchaser by the Seller’s action or inaction resulting in the imposition of this fee are difficult to ascertain, and this fee represents the good faith effort to compensate Purchaser without imposing upon the parties the expensive burden of litigating that cost, and is the agreed liquidated damages with result therefrom.

 

6.3.  Missing Notation Fee.  The Missing Notation Fee on any Invoice that is sent by Seller to a Payor that does not contain the notice as required by Section 12.3. hereof.  It is recognized that the costs imposed upon Purchaser by the Seller’s action or inaction resulting in the imposition of this fee are difficult to ascertain, and this fee represents the good faith effort to compensate Purchaser without imposing upon the parties the expensive burden of litigating that cost, and is the agreed liquidated damages with result therefrom.

 

6.4.  Early Termination Fee.  In the event that Seller elects to terminate this Agreement other than pursuant to Section 20. the Early Termination Fee.

 

6.5.  Late Charge.  The Late Charge, on demand, on all past due amounts due from Seller to Purchaser hereunder.

 

6.6.  Out-of-pocket Expenses.  The out-of-pocket expenses directly incurred by Purchaser in the administration of this Agreement such as wire transfer fees, postage and audit fees.  Seller shall not be required to pay for more than two audits per twelve-month period.  Prior to an Event of Default, the maximum charge per audit shall not exceed $350; after an Event of Default the maximum charge per audit shall not exceed $3750.

 

  

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7.  Repurchase Of Accounts.

 

7.1.  Purchaser may require that Seller repurchase, by payment of the then unpaid Face Amount thereof together with any unpaid fees relating to the Purchased Account on demand as follows:

 

7.1.1.  Notwithstanding Insolvency.  Notwithstanding an Account Debtor becoming Insolvent:

 

(a)  Any Purchased Account:

 

(i) The payment of which has been disputed by the Payor obligated thereon, Purchaser being under no obligation to determine the bona fides of such dispute;

 

(ii) For which Seller has breached any warranty as set forth in the Section 14.4.

 

(b)  Purchased Accounts upon the occurrence of an Event of Default, or upon the termination date of this Agreement.

 

7.1.2.  Absent Insolvency of an Account Debtor.  If an Account Debtor has not become Insolvent on or prior to the Late Payment Date, any Purchased Account which remains unpaid beyond the Late Payment Date (“Repurchased Account”).

 

7.1.3.  Purchase of Repurchased Account.  Purchaser shall purchase from Seller any Repurchased Account on the Insolvency Date.

 

8.  Security Interest.

 

8.1.  As collateral securing the Obligations, Seller grants to Purchaser a continuing first priority security interest in the Collateral, provided, however, that Purchaser acknowledges that its lien will be subordinate to any Existing Equipment Lien.

 

8.2.  Seller may request that Purchaser consent to the creation of a Future Equipment Lien for the purposes of financing or refinancing the purchase of a piece of Equipment, and such consent shall not be unreasonably withheld by Purchaser.

 

8.3.  Notwithstanding the creation of this security interest, the relationship of the parties shall be that of Purchaser and Seller of accounts, and not that of lender and borrower.

 

9.   Clearance Days.

 

9.1.  For all purposes under this Agreement, Clearance Days will be added to the date on which Purchaser receives any payment.

 

10.  Authorization to Purchaser.

 

10.1.  Seller irrevocably authorizes Purchaser at Seller’s expense, to exercise at any time any of the following powers until all of the Obligations have been paid in full:

 

  

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10.1.1.  Receive, take, endorse, assign, deliver, accept and deposit, in the name of Purchaser or Seller, proceeds of any Collateral;

 

10.1.2.  Take or bring, in the name of Purchaser or Seller, all steps, actions, suits or proceedings deemed by Purchaser necessary or desirable to effect collection of or other realization upon Purchaser’s Accounts;

 

10.1.3.  With respect to any of the following established or issued for the benefit of Seller, either individually or as a member of a class or group, file any claim under (i) any bond or (ii) under any trust fund.

 

10.1.4.  Pay any sums necessary to discharge any lien or encumbrance which is senior to Purchaser’s security interest in any assets of Seller, which sums shall be included as Obligations hereunder, and in connection with which sums the Late Charge shall accrue and shall be due and payable;

 

10.1.5.  File in the name of Seller or Purchaser or both:

 

(a)  Mechanics lien or related notices, or

 

(b)  Claims under any payment bond, in connection with goods or services sold by Seller in connection with the improvement of realty;

 

10.1.6.  Notify any Payor obligated with respect to any Account, that the underlying Account has been assigned to Purchaser by Seller and that payment thereof is to be made to the order of and directly and solely to Purchaser;

 

10.1.7.  Communicate directly with Seller’s Payors to verify the amount and validity of any Account created by Seller.

 

10.1.8.  After an Event of Default:

 

(a)  Change the address for delivery of mail to Purchaser and to receive and open mail addressed to Seller;

 

(b)  Extend the time of payment of, compromise or settle for cash, credit, return of merchandise, and upon any terms or conditions, any and all Accounts and discharge or release any Account Debtor or other obligor (including filing of any public record releasing any lien granted to Seller by such Account Debtor), without affecting any of the Obligations;

 

10.1.9.  File any initial financing statements and amendments thereto that:

 

(a)  Indicate the collateral as all assets of the Seller or words of similar effect, regardless of whether any particular asset comprised in the collateral falls within the scope of Article 9 of the UCC, or as being of an equal or lesser scope or with greater detail;

 

  

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(b)  Contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether the Seller is an organization, the type of organization, and any organization identification number issued to the Seller and, (ii) in the case of a financing statement filed as a fixture filing or indicating collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the collateral relates; and

 

(c)  Contain a notification that the Seller has granted a negative pledge to the Purchaser, and that any subsequent lienor may be tortuously interfering with Purchaser’s rights;

 

10.1.10.  Advise third parties that any notification of Seller’s Account Debtors will interfere with Purchaser’s collection rights.

 

10.1.11.  File any Correction Statement in the name of Seller under Section 9-518 of the UCC that Purchaser reasonably deems necessary to preserve its rights hereunder.

 

10.2.  Seller authorizes Purchaser to accept, endorse and deposit on behalf of Seller any checks tendered by an Account Debtor “in full payment” of its obligation to Seller.  Seller shall not assert against Purchaser any claim arising therefrom, irrespective of whether such action by Purchaser effects an accord and satisfaction of Seller’s claims, under Section 3-311 of the UCC, or otherwise.

 

11.  ACH Authorization.

 

11.1.  In order to satisfy any of the Obligations, Seller authorizes Purchaser to initiate electronic debit or credit entries through the ACH system to any deposit account maintained by Seller.

 

12.  Covenants By Seller.

 

12.1.  After written notice by Purchaser to Seller, and automatically, without notice, after an Event of Default, Seller shall not (a) grant any extension of time for payment of any of its Accounts, (b) compromise or settle any of its Accounts for less than the full amount thereof, (c) release in whole or in part any Payor, or (d) grant any credits, discounts, allowances, deductions, return authorizations or the like with respect to any of the Accounts.

 

12.2.  From time to time as requested by Purchaser, at the sole expense of Seller, Purchaser or its designee shall have access, during reasonable business hours if prior to an Event of Default and at any time if on or after an Event of Default, to all premises where Collateral is located for the purposes of inspecting (and removing, if after the occurrence of an Event of Default) any of the Collateral, including Seller’s books and records, and Seller shall permit Purchaser or its designee to make copies of such books and records or extracts therefrom as Purchaser may request.  Without expense to Purchaser, Purchaser may use any of Seller’s personnel, equipment, including computer equipment, programs, printed output and computer readable media, supplies and premises for the collection of Accounts and realization on other Collateral as Purchaser, in its sole discretion, deems appropriate.  Seller hereby irrevocably authorizes all accountants and third parties to disclose and deliver to Purchaser at Seller’s expense all financial information, books and records, work papers, management reports and other information in their possession relating to Seller.

 

  

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12.3.  Before sending any Invoice to an Account Debtor, Seller shall mark same with such notice of assignment as Purchaser may require.

 

12.4.  Seller shall pay when due all payroll and other taxes, and shall provide proof thereof to Purchaser in such form as Purchaser shall reasonably require.

 

12.5.  Seller shall not create, incur, assume or permit to exist any lien, other than Permitted Liens, upon or with respect to any assets in which Purchaser now or hereafter holds a security interest.

 

12.6.  Notwithstanding Seller’s obligation to pay the Misdirected Payment Fee, Seller shall pay to Purchaser on the next banking day following the date of receipt by Seller the amount of:

 

12.6.1.  Any payment on account of a Purchased Account.

 

12.6.2.  After the occurrence of an Event of Default, any payment on account of any Account.

 

12.7.  Avoidance Claims.

 

12.7.1.  Seller shall indemnify Purchaser from any loss arising out of the assertion of any Avoidance Claim other than such claims that relate to Purchased Accounts that are owed by an Account Debtor which was Insolvent at the time the subject payment was received by Purchaser, and shall pay to Purchaser on demand the amount thereof.

 

12.7.2.  Seller shall notify Purchaser within two business days of it becoming aware of the assertion of an Avoidance Claim.

 

12.7.3.  This provision shall survive termination of this Agreement.

 

13.  Account Disputes.

 

13.1.  Seller shall notify Purchaser promptly of and, if requested by Purchaser, will settle all disputes concerning any Purchased Account, at Seller’s sole cost and expense.  Purchaser may, but is not required to, attempt to settle, compromise, or litigate (collectively, “Resolve”) the dispute upon such terms, as Purchaser in its sole discretion deem advisable, for Seller’s account and risk and at Seller’s sole expense.  Upon the occurrence of an Event of Default Purchaser may Resolve such issues with respect to any Account of Seller.

 

  

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14.  Representation and Warranties.  Seller represents and warrants at the time of the execution of this Agreement, and at each Purchase Date that:

 

14.1.  It is fully authorized to enter into this Agreement and to perform hereunder;

 

14.2.  This Agreement constitutes its legal, valid and binding obligation; and

 

14.3.  Seller’s assets are presently worth more than the sum of its debts, excluding debts owed to Subordinating Creditors, and Seller is able to pay its debts as they become due.

 

14.4.  Seller is in good standing in the jurisdiction of its organization.

 

14.5.  The Purchased Accounts are and will remain:

 

14.5.1.  Bona fide existing obligations created by the sale and delivery of goods or the rendition of services in the ordinary course of Seller’s business;

 

14.5.2.  To the best of Seller’s knowledge, unconditionally owed and will be paid to Purchaser without defenses, disputes, offsets, counterclaims, or rights of return or cancellation, other than Accounts owed by an Account Debtor which was Insolvent.

 

14.5.3.  Not the obligation or purported obligation of any entity that is affiliated with Seller or in any way is not at “arms length” from the Seller.

 

14.6.  Seller has not received notice or otherwise learned of actual or imminent bankruptcy, insolvency, or material impairment of the financial condition of any applicable Account Debtor regarding Purchased Accounts.

 

15.  Indemnification.

 

15.1.  Seller agrees to indemnify Purchaser against and save Purchaser harmless from any and all manner of suits, claims, liabilities, demands and expenses (including reasonable attorneys’ fees and collection costs) resulting from or arising out of this Agreement, and resulting from or arising out of acts or omissions by Seller or any Account Debtor, whether directly or indirectly, including the transactions or relationships contemplated hereby (including the enforcement of this Agreement), and any failure by Seller to perform or observe its obligations under this Agreement.

 

16.  Disclaimer of Liability.

 

16.1.  In no event will Purchaser be liable to Seller for any lost profits, lost savings or other consequential, incidental or special damages resulting from or arising out of or in connection with this agreement, the transactions or relationships contemplated hereby or purchaser’s performance or failure to perform hereunder, even if purchaser has been advised of the possibility of such damages.

 

  

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17.  Default.

 

17.1.  Events of Default.  The following events will constitute an Event of Default hereunder: (a) Seller defaults in the payment of any Obligations or in the performance of any provision hereof or of any other agreement now or hereafter entered into with Purchaser, or any warranty or representation contained herein proves to be false in any way, howsoever minor, (b) Seller or any guarantor of the Obligations becomes subject to any debtor-relief proceedings, (c) any such guarantor fails to perform or observe any of such Guarantor’s obligations to Purchaser or shall notify Purchaser of its intention to rescind, modify, terminate or revoke any guaranty of the Obligations, or any such guaranty shall cease to be in full force and effect for any reason whatever, (d) Purchaser for any reason, in good faith, deems itself insecure with respect to the prospect of repayment or performance of the Obligations.

 

17.2.  Waiver of Notice.  PURCHASER’S FAILURE TO CHARGE OR ACCRUE INTEREST OR FEES AT ANY “DEFAULT” OR “PAST DUE” RATE SHALL NOT BE DEEMED A WAIVER BY PURCHASER OF ITS CLAIM THERETO.

 

17.3.  Effect of Default.

 

17.3.1.  Upon the occurrence of any Event of Default, in addition to any rights Purchaser has under this Agreement or applicable law, Purchaser may do either or both of (i) demand repurchase of all Purchased Accounts or any portion thereof, (ii) immediately terminate this Agreement.  In addition, upon an Event of Default all Obligations shall immediately become due and payable without notice.

 

17.3.2.  The Late Charge shall accrue and is payable on demand on any Obligation not paid when due.

 

18.  Account Stated.

 

18.1.  Purchaser shall render to Seller a statement setting forth the transactions arising hereunder.  Each statement shall be considered correct and binding upon Seller as an account stated, except to the extent that Purchaser receives, within sixty days after the mailing of such statement, written notice from Seller of any specific exceptions by Seller to that statement, and then it shall be binding against Seller as to any items to which it has not objected.

 

19.  Amendment and Waiver.

 

19.1.  Only a writing signed by all parties hereto may amend this Agreement.  No failure or delay in exercising any right hereunder shall impair any such right that Purchaser may have, nor shall any waiver by Purchaser hereunder be deemed a waiver of any default or breach subsequently occurring. Purchaser’s rights and remedies herein are cumulative and not exclusive of each other or of any rights or remedies that Purchaser would otherwise have.

 

  

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20.  Termination; Effective Date.

 

20.1.  This Agreement will be effective on the date it is signed by the Parties, shall continue for the Term, and shall be automatically extended for successive Terms.  Seller may terminate this Agreement by delivering a notice to Purchaser stating (i) that seller intends to terminate this Agreement and (ii) the date such termination shall be effective, such date not to be earlier than sixty days following the date of such notice.  Notwithstanding anything to the contrary, Seller’s notice hereunder shall not be effective until and unless Seller has repaid all of the Obligations and otherwise satisfied the requirements for a Complete Termination. Purchaser may terminate this Agreement at any time after an Event of Default by giving written notice to Seller.  Purchaser may also terminate this Agreement by giving written notice to Seller at least sixty days prior to the end of the Term in which case upon expiration of the Term, Purchaser shall cease purchasing Accounts, and upon Complete Termination but not earlier, this Agreement shall terminate.

 

21.  No Lien Termination without Release.

 

21.1.  In recognition of the Purchaser’s right to have its attorneys’ fees and other expenses incurred in connection with this Agreement secured by the Collateral, notwithstanding payment in full of all Obligations by Seller, Purchaser shall not be required to record any terminations or satisfactions of any of Purchaser’s liens on the Collateral unless and until Complete Termination has occurred.  Seller understands that this provision constitutes a waiver of its rights under Section 9-513 of the UCC.

 

22.  Conflict.

 

22.1.  Unless otherwise expressly stated in any other agreement between Purchaser and Seller, if a conflict exists between the provisions of this Agreement and the provisions of such other agreement, the provisions of this Agreement shall control.

 

23.  Severability.

 

23.1.  In the event any one or more of the provisions contained in this Agreement is held to be invalid, illegal or unenforceable in any respect, then such provision shall be ineffective only to the extent of such prohibition or invalidity, and the validity, legality, and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

 

24.  Relationship of Parties.

 

24.1.  The relationship of the parties hereto shall be that of Seller and Purchaser of Accounts, and Purchaser shall not be a fiduciary of the Seller, although Seller may be a fiduciary of the Purchaser.

 

  

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25.  Attorneys’ Fees.  Seller agrees to reimburse Purchaser on demand for:

 

25.1.  The actual amount of all costs and expenses, including attorneys’ fees, which Purchaser has incurred or may incur in:

 

25.1.1.  Regards to any dispute with Purchaser, an Account Debtor a person guaranteeing this Agreement or any of their respective agents, representatives, subcontractors, employees or officers;

 

25.1.2.  Protecting, preserving or enforcing any lien, security or other right granted by Seller to Purchaser or arising under applicable law, whether or not suit is brought, including but not limited to the defense of any Avoidance Claims or the defense of Purchaser’s lien priority;

 

25.2.  The actual costs, including photocopying (which, if performed by Purchaser’s employees, shall be at the rate of $.10/page), travel, and attorneys’ fees and expenses incurred in complying with any subpoena or other legal process in any way relating to Seller. This provision shall survive termination of this Agreement.

 

25.3.  The actual amount of all costs and expenses, including attorneys’ fees, which Purchaser may incur in enforcing this Agreement and any documents prepared in connection herewith, or in connection with any federal or state insolvency proceeding commenced by or against Seller, including those (i) arising out the automatic stay, (ii) seeking dismissal or conversion of the bankruptcy proceeding or (ii) opposing confirmation of Seller’s plan there under.

 

26.  Entire Agreement.

 

26.1.  No promises of any kind have been made by Purchaser or any third party to induce Seller to execute this Agreement.  No course of dealing, course of performance or trade usage, and no parole evidence of any nature, shall be used to supplement or modify any terms of this Agreement.

 

27.  Choice of Law.

 

27.1.  This Agreement and all transactions contemplated hereunder and/or evidenced hereby shall be governed by, construed under, and enforced in accordance with the internal laws of the Chosen State.

 

28.  Jury Trial Waiver.

 

28.1.  IN RECOGNITION OF THE HIGHER COSTS AND DELAY WHICH MAY RESULT FROM A JURY TRIAL, THE PARTIES HERETO WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING HEREUNDER, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY FURTHER WAIVES ANY RIGHT TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

  

14

  

 

29.  Venue; Jurisdiction.

 

29.1.  Any suit, action or proceeding arising hereunder, or the interpretation, performance or breach hereof, shall, if Purchaser so elects, be instituted in any court sitting in the Chosen State, in the city in which Purchaser’s chief executive office is located, or if none, any court sitting in the Chosen State, or alternatively, if Purchaser so elects, any court in which Seller’s chief executive office is located, or if none, any court sitting in the state in which Seller’s chief executive office is located (the “Acceptable Forums”).  Seller agrees that the Acceptable Forums are convenient to it, and submits to the jurisdiction of the Acceptable Forums and waives any and all objections to jurisdiction or venue.  Should such proceeding be initiated in any other forum, Seller waives any right to oppose any motion or application made by Purchaser to transfer such proceeding to an Acceptable Forum.

 

30.  Time of the Essence.

 

30.1.  It is agreed that time is of the essence in all matters herein.

 

31.  Service of Process.

 

31.1.  Seller agrees that Purchaser may effect service of process upon Seller by regular mail at the address set forth herein or at such other address as may be reflected in the records of Purchaser, or at the option of Purchaser by service upon Seller’s agent for the service of process.

 

32.  Assignment

 

32.1.  Purchaser may assign its rights and delegate its duties hereunder.  Upon such assignment, Seller shall be deemed to have attorned to such assignee and shall owe the same obligations to such assignee and shall accept performance hereunder by such assignee as if such assignee were Purchaser.

 

  

15

  

 

33.  Counterparts.

 

33.1.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were upon the same instrument.  Delivery of an executed counterpart of the signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement, and any party delivering such an executed counterpart of the signature page to this Agreement by facsimile to any other party shall thereafter also promptly deliver a manually executed counterpart of this Agreement to such other party, provided that the failure to deliver such manually executed counterpart shall not affect the validity, enforceability, or binding effect of this Agreement.

 

34.  Notice.

 

34.1.  All notices required to be given to any party other than Purchaser shall be deemed given upon the first to occur of (i) deposit thereof in a receptacle under the control of the United States Postal Service, (ii) transmittal by electronic means to a receiver under the control of such party, or (iii) actual receipt by such party or an employee or agent of such party. All notices to Purchaser shall be deemed given upon actual receipt by a responsible officer of Purchaser.

 

34.2.  For the purposes hereof, notices hereunder shall be sent to the following addresses, or to such other addresses as each such party may in writing hereafter indicate:

 

SELLER

 

	
Address: 

	
580 Garcia Avenue

Pittsburg, CA 94565

	
Officer: 

Email address: 

	
Elliot Maza, Chief Executive Officer

emaza@biozonelabs.com

 

PURCHASER

 

	
Address: 

	
90 Merrick Avenue

East Meadow, NY 11554

	
Officer: 

Email address:

	
Dan Demonte, Vice President

dan.demonte@midlandamericancapital.com

 

IN WITNESS WHEREOF, the Parties have executed this agreement on the day and year first above written.

 

 

	
SELLER: 

	
BioZone Laboratories, Inc.

	 	 	 	 
	 	
By: 

	 	 
	 	 	
Elliot Maza

Chief Executive Officer

	 
	 	 	 	 
	 	 	 	 
	
PURCHASER:

	
Midland American Capital Corporation

	 	 	 	 
	 	
By: 

	 	 
	 	 	
Tracey Turzinski

	 
	 	 	
Executive Vice President

	 

 

  

16

  

 

EXHIBIT 1.10.3. 

 

GENERAL RELEASE

 

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, the undersigned and each of them (collectively “Releasor”) hereby forever releases, discharges and acquits Midland American Capital Corporation  (“Releasee”), its parent, directors, shareholders, agents and employees, of and from any and all claims of every type, kind, nature, description or character, and irrespective of how, why, or by reason of what facts, whether heretofore existing, now existing or hereafter arising, or which could, might, or may be claimed to exist, of whatever kind or name, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, each as though fully set forth herein at length, to the extent that they arise out of or are in way connected to or are related to that certain Factoring and Security Agreement dated March ____, 2013.

 

Releasor agrees that the matters released herein are not limited to matters which are known or disclosed, and the Releasor waives any and all rights and benefits which it now has, or in the future may have.

 

Releasor acknowledges that factual matters now unknown to it may have given or may hereafter give rise to Claims which are presently unknown, unanticipated and unsuspected, and it acknowledges that this Release has been negotiated and agreed upon in light of that realization and that it nevertheless hereby intends to release, discharge and acquit the Releasee from any such unknown Claims.

 

Acceptance of this Release shall not be deemed or construed as an admission of liability by any party released.

 

In the event of any litigation arising out of or related to this Release, the prevailing party shall recover its reasonable attorney’s fees and expenses from the unsuccessful party.  It shall be presumed (subject to rebuttal only by the introduction of competent evidence to the contrary) that the amount recoverable is the amount billed to the prevailing party by its counsel and that such amount will be reasonable if based on the billing rates charged to the prevailing party by its counsel in similar matters.

 

Releasor acknowledges that either (a) it has had advice of counsel of its own choosing in negotiations for and the preparation of this release, or (b) it has knowingly determined that such advice is not needed.

 

	
DATED: ___________________

	
BioZone Laboratories, Inc.

	 	 	 	 
	 	 	
         CONTRACT EXHIBIT

	 	 	 	 
	 	
By: 

	 	 
	 	 	
Printed Name:

	 
	 	 	
Title: Chief Executive Officer

	 
	 	 	 	 

 

  

17

  

 

WIRE AND ACH TRANSFER AUTHORIZATION

 

MIDLAND AMERICAN CAPITAL CORPORATION is hereby authorized to transfer money via wire or automated clearing house transmission into the account specified below.  (Please fill-in information requested.)

 

BANK: 

 

ADDRESS: 

 

CITY, STATE, ZIP: 

 

ROUTING (ABA) NO.: 

 

ACCOUNT NO.: 

 

 

BioZone Laboratories, Inc.

 

	
By: 

	
_______________________________

	 	
Date: ________________

	 	
Elliot Maza

	 	 
	 	
Chief Executive Officer

	 	 

 

  

18

  

 

EXHIBIT 1.14

EXISTING EQUIPMENT LIENS

1.           UCC-1 filed on May 13, 2008, with the California Secretary of State as Filing Number 087157745660, and any assignments, amendments and continuations thereof.

 

2.           UCC-1 filed on June 24, 2008, with the California Secretary of State as Filing Number 087162745292, and any assignments, amendments and continuations thereof.

 

3.           UCC-1 filed on May 28, 2010, with the California Secretary of State as Filing Number 107233209269, and any assignments, amendments and continuations thereof.

 

4.           UCC-1 filed on July 14, 2010, with the California Secretary of State as Filing Number 107238295441, and any assignments, amendments and continuations thereof.

 

5.           UCC-1 filed on July 20, 2010, with the California Secretary of State as Filing Number 107238740183, and any assignments, amendments and continuations thereof.

 

6.           UCC-1 filed on December 27, 2010, with the California Secretary of State as Filing Number 107255646834, and any assignments, amendments and continuations thereof.

 

7.           UCC-1 filed on February 9, 2011, with the California Secretary of State as Filing Number 117260162935, and any assignments, amendments and continuations thereof.

 

8.           UCC-1 filed on February 27, 2013, with the California Secretary of State as Filing Number 137349925629, and any assignments, amendments and continuations thereof.

 

9.           UCC-1 filed on March 1, 2013, with the California Secretary of State as Filing Number 137350306301, and any assignments, amendments and continuations thereof.

 

19Unassociated Document

 

PURCHASE MONEY FINANCING RIDER

This PURCHASE MONEY FINANCING RIDER (“Rider”) is dated as of March ____, 2013 between BioZone Laboratories, Inc., a California corporation (“Debtor”) and Midland American Capital Corporation, a Nevada corporation (“Secured Party”).

 

RECITAL

 

A.           Debtor and Secured Party are parties to the Factoring Agreement pursuant to which Secured Party purchases accounts from Debtor.

 

B.           Debtor may, from time to time, request financing hereunder from Secured Party to enable Debtor to acquire Raw Materials from Suppliers for manufacturing Pre-Sold Goods for sale to Buyers which have provided to Debtor purchase orders or other confirmation.

 

C.           In connection therewith, Debtor may request that Secured Party either (1) cause Issuer to issue Letters of Credit to Suppliers, or (2) tender payments directly to Suppliers for Raw Materials, in accordance with the terms and conditions herein.

 

NOW, THEREFORE, in consideration of the premises, and intending to be legally bound hereby, the Parties hereby agree as follows:

 

AGREEMENT

 

1.           Certain Definitions and Index to Definitions.  Unless otherwise defined herein, any capitalized terms used herein shall have the meanings ascribed in the Factoring Agreement.  All terms used herein that are defined in the Uniform Commercial Code shall have the meanings ascribed thereto therein.  As used herein, the following terms shall have the following meanings:

 

1.1           “Additional Fees Advance” – Any fees incidental to a Financed Transaction which are paid by Secured Party on behalf of Debtor, including, but not limited to, banking fees, inspection fees, and shipping fees.

 

1.2           “Advance” – A Letter of Credit Advance, Purchase Money Advance, or Additional Fees Advance.

 

1.3           “Buyer” - A customer of Debtor, acceptable to Secured Party in its sole discretion, which has agreed to purchase Pre-Sold Goods.

 

1.4           “Due Date” – The earliest of:

 

1.4.1           One-hundred days from the date of an Advance, or

 

1.4.2           The date on which the Subject Account arising out of the sale of Pre-Sold Goods is purchased by the Secured Party.

 

  

1

  

 

1.5           “Eligible Purchase Order” – A binding Purchase order issued by a Buyer to the Debtor which specifies the terms, description of the Pre-sold Goods,  quantity, and price of such order.

 

1.6           “Factoring Agreement” - That certain Factoring and Security Agreement between Debtor and Secured Party dated even or nearly even herewith, as amended.

 

1.7           “Factoring Fees” – The Base Fees as set forth in the Factoring Agreement.

 

1.8           “Factory Purchase Order” – A written purchase order for the Raw Materials issued by the Debtor to the Supplier and specifying the terms, description of the goods, quantity, and price of such factory order.

 

1.9           “Financed Transaction” – A transaction whereby Secured Party, upon the Debtor’s request, (i) arranges for the issuance of a Letter of Credit or (ii) makes a Purchase Money Advance.

 

1.10           Financing Request Package” – Shall include the following:

 

1.10.1           An Eligible Purchase Order;

 

1.10.2           A Purchase Order Acknowledgement issued by the Debtor to the Buyer;

 

1.10.3           A Factory Purchase Order issued by the Debtor to the Supplier;

 

1.10.4           A Pro-forma Invoice issued by a Supplier;

 

1.10.5           An itemization of all costs related to the Financed Transaction, including but not limited to the cost and sale price of the Raw Materials, Pre-Sold Goods, shipping and insurance costs, and customs duties;

 

1.10.6           Identification of any freight forwarder, shipping company, and instructions for delivery of the Pre-Sold Goods to the Buyer;

 

1.10.7           A fully executed Supplier Letter;

 

1.10.8           A fully executed Shipping Broker’s Agreement;

 

1.10.9           A fully executed Warehouse Agreement.

 

1.11           “Initial Purchase Money Fee” – The product of the Initial Purchase Money Fee Rate and the Purchase Money Accommodation.

 

1.12           “Initial Purchase Money Fee Period” – Thirty days from the making of a Purchase Money Accommodation.

 

1.13           “Initial Purchase Money Fee Rate” – 2.95%.

 

1.14           “Issuer” – The issuer of a Letter of Credit.

 

  

2

  

 

1.15           “Letter of Credit” – A letter of credit issued in favor of a Supplier.

 

1.15.1           To enable Debtor to acquire Raw Materials:

 

1.15.2           In a form acceptable to Secured Party;

 

1.15.3           Requiring inter alia, as a condition of draw by the Supplier, that the Supplier present an inspection certificate by the Debtor or an independent inspection service acceptable to Secured Party that the Raw Materials which are the subject of the Letter of Credit conform to a Factory Purchase Order;

 

1.15.4           Requiring that the shipment of the Raw Materials be evidenced by a negotiable bill of lading, consigned to Secured Party.

 

1.16           “Letter of Credit Advance” – Amounts paid by Secured Party on account of a Letter of Credit.

 

1.17            “Pre-Sold Goods” – Goods manufactured from Raw Materials which are the subject of an Eligible Purchase Order.

 

1.18           “Pro-forma Invoice” – A written acknowledgement issued by a Supplier confirming receipt of a Factory Purchase Order and specifying the terms, description of the Raw Materials, quantity, and price of such order;

 

1.19           “Purchase Money Advance” – A payment by Secured Party to a Supplier on account of the purchase price for Raw Materials.

 

1.20            “Purchase Money Accommodation” – either :

 

1.20.1           The face amount of a Letter of Credit that has not expired or been cancelled by the Issuer; or

 

1.20.2           The amount of an Advance other than a Letter of Credit Advance.

 

1.21           “Purchase Money Fee” – Commencing with the end of the Initial Purchase Money Fee Period, the product of the Purchase Money Fee Rate and the Purchase Money Accommodation for each Purchase Money Fee Period or portion thereof that any portion of a Purchase Money Accommodation remains unpaid.

 

1.22           “Purchase Money Fee Period” – Ten days.

 

1.23           “Purchase Money Fee Rate” – 0.983%.

 

1.24           “Purchase Order Acknowledgement” – A written acknowledgement issued by the Debtor to the Buyer confirming the receipt by the Debtor of an Eligible Purchase Order, specifying the terms, description of the Pre-Sold Goods, quantity, and price of such order.

 

1.25           “Raw Materials” – Raw materials used to manufacture Pre-Sold Goods.

 

  

3

  

 

1.26           “Reserve Account” – The account between Debtor and Secured Party maintained by Secured Party under the Factoring Agreement.

 

1.27           “Subject Account” – An Account, created by the sale of the goods or services which are the subject of an Eligible Purchase Order, owing by the issuer of an Eligible Purchase Order.

 

1.28           “Supplier” – A supplier, acceptable to Secured Party in its sole discretion, who has agreed to sell the Raw Materials which are the subject of a Financed Transaction.

 

1.29           “Supplier Letter” – A letter from Supplier, with all required information supplied, in the form attached hereto as Exhibit 1.28.

 

1.30           “Warehouse” – Segregated warehouse space in which Debtor agrees to maintain the Pre-Sold Goods, at a location specified by Secured Party.

 

1.31           “Warehouse Agreement” – An agreement among a warehouse, Debtor and Secured Party, in form acceptable to Secured Party, acknowledging Secured Party’s security interest in the Pre-Sold Goods and providing among other things that such Pre-Sold Goods shall not be released by the warehouse without Secured Party’s prior written consent.

 

2.           Incorporation into Factoring Agreement.  This Rider shall be deemed a part of the Factoring Agreement, the provisions of which are incorporated herein by reference.

 

3.           Letters of Credit.  Subject to the terms and conditions of this Agreement and the Factoring Agreement:

 

3.1           Issuance of Letters of Credit.  Secured Party may, from time to time, in its sole discretion and at Debtor's request, cause the issuance of Letters of Credit in an amount determined by Secured Party.

 

3.2           Request for Issuance.  Each request by Debtor for the issuance of Letter of Credit shall be accompanied by a Financing Request Package.

 

3.3           Cancelation of Letters of Credit.  Debtor may, from time to time, request that Secured Party cause one or more Letters of Credit to be cancelled provided that no draws thereunder remain outstanding.  In such event, Secured Party will request such cancellation by Issuer provided however that no Letter of Credit shall be deemed cancelled until it is cancelled by Issuer.

 

4.           Purchase Money Advances.

 

4.1           Secured Party may, from time to time, in its sole discretion and at Debtor’s request, make a Purchase Money Advance.

 

4.2           Each request by Debtor for a Purchase Money Advance shall be accompanied by a Financing Request Package.

 

  

4

  

 

5.           Reimbursement for Advances.

 

5.1           Debtor shall reimburse Secured Party for all Advances on or before the Due Date.    Such reimbursement may at Debtor’s request be made out of funds available to Debtor under the Factoring Agreement.

 

5.2           Secured Party may charge Debtor’s Reserve Account with any past due amounts hereunder.

 

5.3           Secured Party shall have no duty to inquire into the propriety of any request by an Issuer for payment by Secured Party, and all such payments by Secured Party shall conclusively establish Debtor’s reimbursement obligations hereunder.

 

5.4           To secure Debtor’s obligations hereunder, Secured Party may charge the Reserve Account with undrawn amount of any Letters of Credit.

 

6.           Security Interest

 

6.1           As collateral securing the Obligations, Debtor grants to Secured Party a continuing first priority security interest in the Collateral, provided, however, that Secured Party acknowledges that its lien will be subordinate to any Existing Equipment Lien and any Future Equipment Lien Authorized by Secured Party pursuant to Section 8.2 of the Factoring Agreement.

 

7.           Sales of Accounts to Secured Party

 

7.1           Debtor agrees to sell to Secured Party any Account arising out of the sale of Pre-Sold Goods which are the subject of a Financed Transaction.

 

8.           Authorization to Secured Party.

 

8.1           Debtor irrevocably authorizes Secured Party at Debtor's expense, to exercise at any time any of the following powers until all of the Obligations have been paid in full:

 

8.1.1           Receive, take, endorse, assign, deliver, accept and deposit, in the name of Secured Party or Debtor, proceeds of any Collateral;

 

8.1.2           Notify any obligor obligated with respect to any Account, that all the Debtor’s present and future Accounts have been assigned to Secured Party by Debtor and that payment thereof is to be made to the order of and directly and solely to Secured Party;

 

8.1.3           Communicate directly with Debtor’s Payors to verify the amount and validity of any Account created by Debtor;

 

  

5

  

 

8.1.4           File any initial financing statements and amendments thereto that:

 

(a)      Indicate the collateral as all assets of the Debtor or words of similar effect, regardless of whether any particular asset comprised in the collateral falls within the scope of Article 9 of the UCC, or as being of an equal or lesser scope or with greater detail;

 

(b)      Contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether the Debtor is an organization, the type of organization, and any organization identification number issued to the Debtor and, (ii) in the case of a financing statement filed as a fixture filing or indicating collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the collateral relates.

 

9.           Fees.

 

9.1           Debtor shall pay the:

 

9.1.1           Initial Purchase Money Fee immediately upon its accrual.

 

9.1.2           Purchase Money Fee at the end of each Purchase Money Fee Period.

 

10.           Reports of Cancelled Purchase Orders.

 

10.1           Debtor shall immediately advise Secured Party if and when an Eligible Purchase Order against which a Letter of Credit has been issued has been cancelled or attempted to have been cancelled.

 

11.           Indemnification.

 

11.1.1           Debtor unconditionally indemnifies Secured Party and holds Secured Party harmless from any and all loss, claim or liability incurred by Secured Party arising from any transactions or occurrences relating to Letters of Credit established or opened for Debtor’s account, the collateral relating thereto and any drafts or acceptances thereunder, and all Obligations thereunder, including any such loss or claim due to any errors, omissions, negligence, misconduct or action taken by any Issuer.  This indemnity shall survive termination of this Agreement.  Debtor agrees that any charges incurred by Secured Party for Debtor’s account by the Issuer shall be conclusive on Debtor and may be charged to the Financing Balance.

 

11.1.2           Secured Party shall not be responsible for:  (a) the existence, character, quality, quantity, condition, packing, value or delivery of the goods purporting to be represented by any documents; (b) any difference or variation in the character, quality, quantity, condition, packing, value or delivery of the goods from that expressed in the documents; (c) the validity, sufficiency or genuineness of any documents presented in connection with the drawing under the Letter of Credit or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; (d) the time, place, manner or order in which shipment is made; partial or incomplete shipment, or failure or omission to ship any or all of the goods referred to in the Letters of Credit or documents; (e) any deviation from instructions given by the applicant to the Issuer in connection with the Letter of Credit; (f) delay, default, or fraud by the shipper and/or anyone else in connection with the goods or the shipping thereof; or (g) any breach of contract between the shipper or vendors and Debtor.

 

  

6

  

 

11.1.3           Debtor agrees that any action taken by Secured Party, if taken in good faith, or any action taken by any Issuer, under or in connection with the Letters of Credit, or the drafts or acceptances, shall be binding on Debtor and shall not result in any liability whatsoever of Secured Party to Debtor.  In furtherance thereof, Secured Party shall have the full right and authority to:  (a)  resolve any questions of non-compliance of documents; (b) give any instructions as to acceptance or rejection of any documents or goods; (c) execute any and all steamship or airways guaranties (and applications therefore), indemnities or delivery orders; (d) grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents; and (e) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letters of Credit, drafts or acceptances; all in Secured Party’s sole name.

 

11.2           Debtor agrees that:  (a) any necessary import, export or other licenses or certificates for the import or handling of the subject goods will have been promptly procured; (b) all foreign and domestic governmental laws and regulations in regard to the shipment and importation of the subject goods, or the financing thereof will have been promptly and fully complied with; and (c) any certificates in that regard that Secured Party may at any time request will be promptly furnished.  In connection herewith, Debtor warrants and represents that all shipments made under any such Letters of Credit are in accordance with the laws and regulations of the countries in which the shipments originate and terminate, and are not prohibited by any such laws and regulations.  Debtor assumes all risk, liability and responsibility for, and agrees to pay and discharge, all present and future local, state, federal or foreign taxes, duties, or levies.  Any embargo, restriction, laws, customs or regulations of any country, state, Secured Party, or other political subdivision, where the subject goods are or may be located, or wherein payments are to be made, or wherein drafts may be drawn, negotiated, accepted, or paid, shall be solely Debtor’s risk, liability and responsibility.

 

12.           Insurance.

 

12.1           Debtor shall maintain or cause to be maintained at all times, with financially sound and reputable insurers, casualty insurance with respect to the Inventory and other assets.  All such insurance policies shall be in such form, substance, amounts and coverage as may be satisfactory to Secured Party and shall provide for thirty- (30) day’s prior written notice to Secured Party of cancellation or reduction of coverage.  Debtor hereby irrevocably authorizes Secured Party and any designee of Secured Party to obtain at debtor’s expense, and, after an Event of Default, to adjust or settle any claim or other matter under or arising pursuant to such insurance or to amend or cancel such insurance.  Debtor shall deliver to Secured Party evidence of such insurance and a Secured Party's loss payable endorsement naming Secured Party as loss payee as to all existing and future insurance policies relating to the Inventory.  Debtor shall deliver to Secured Party, in kind, all instruments representing proceeds of insurance received by Debtor.  Secured Party may apply any and all insurance proceeds received at any time to the cost of repairs to or replacement of any portion of the Inventory and/or, at Secured Party's option, to the payment of or as security for any of the Obligations, whether or not due, in any order or manner as Secured Party determines.

 

[Signature Page to Follow]

 

  

7

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Rider to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written.

 

 

	
DEBTOR:

	
BioZone Laboratories, Inc.

	 	 	 	 
	 	
By: 

	 	 
	 	 	
Elliot Maza

	 
	 	 	
Chief Executive Officer

	 
	 	 	 	 
	 	 	 	 
	
SECURED PARTY:

	
Midland American Capital Corporation

	 	 	 	 
	 	
By:

	 	 
	 	 	
Tracey Turzinski

	 
	 	 	
Executive Vice President

	 

 

  

8

  

 

EXHIBIT 1.28

 

MIDLAND AMERICAN CAPITAL

 

4600 Fuller Drive

Irving, TX 75038

[insert date]

[insert name of supplier]

[insert address of supplier]

Ladies and Gentlemen:

We provide financing to BioZone Laboratories, Inc. (“Debtor”)

We agree to pay $ [insert purchase price] (the “Purchase Price”) to you in payment for the products (the “Purchased Goods”) described in purchase order # [insert purchase order number]  (the “Purchase Order”) issued to you by the Debtor, a copy of which is attached hereto.

 

Upon receipt of the Purchase Price, you agree to ship all of the Purchased Goods on or before [insert shipping date not later than two business days after receipt of payment] (“Final Shipping Date”) to the “Ship To” address set forth in the Purchase Order  via  the shipping method set forth in the Purchase Order, fully insured by you.

 

If all of the Purchased Goods are not shipped in accordance with this letter agreement, you will repay the entire Purchase Price to us by wire transfer within three days of the Final Shipping Date.  You will also repay to us, upon demand and by wire transfer, any portion of the Purchase Price which relate to goods shipped by you hereunder which are not free from all defects in materials, manufacturing, and design or which do not otherwise conform with the specifications listed on the Purchase Order.

 

You agree not to apply the Purchase Price to any transaction other than the Purchase Order.

 

In the event that either of us find it necessary to retain counsel in connection with this letter agreement, the prevailing party shall recover its reasonable attorney’s fees and expenses from the unsuccessful party.  It shall be presumed (subject to rebuttal only by the introduction of competent evidence to the contrary) that the amount recoverable is the amount billed to the prevailing party by its counsel and that such amount will be reasonable if based on the billing rates charged to the prevailing party by its counsel in similar matters.

 

  

9

  

 

Please have an authorized representative acknowledge your acceptance of this letter agreement.  The signature of the Debtor hereto shall evidence its request that we pay the Purchase Price to you and to charge its account with us for the payment.

 

 

	 	
Sincerely yours,

	 
	 	 	 
	 	
Midland American Capital Corporation

	 	 	 	 
	 	
By: 

	 	 
	 	 	

Tracey Turzinski

	 
	 	 	

Executive Vice President

	 

 

 

	

ACKNOWLEDGED:

	 
	 	 
	

BioZone Laboratories, Inc.

	 
	 	 	 
	
By: 

	 	 
	 	

Elliot Maza

	 
	 	

Chief Executive Officer

	 

 

 

ACCEPTED AND AGREED TO:

[insert name of supplier]

By: 

Printed Name: 

Title:

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