7.0 • Documentation

    ANAPLANS’s rights and remedies are governed in the legal documents ANAPLANS generates and have executed by our clients. It is imperative to the program that each Associate understands ANAPLANS’s documentation and how the program works and in order to explain them to their clients.

    All of our documentation has been written by legal counsel familiar with the law of factoring and secured parties. Associates are not permitted to change anything within the documentation without approval.

    ANAPLANS will maintain a client file including all legal documentation, correspondence and credit work papers. All documentation should be as complete as possible. Poor management of this process could result in losses.

    7.1 THE LEGAL DOCUMENTS
    7.1.1 The Purchase and Sale Agreement, Factoring Agreement, Loan Agreement
    The Purchase and Sale Agreement spells out the responsibilities of both parties to the agreement. The parties are the Buyer (ANAPLANS) and the Seller (client). An overview of this document follows:

    Agreement is between each Client and ANAPLANS

    (Clause 1) Purchase and Sale of Accounts

    • ANAPLANS agrees to purchase invoices (accounts)

    (Clause 2) Sale Procedure

    • At any time Client may submit invoices to ANAPLANS for funding
    • ANAPLANS can decide which invoices to purchase, in its sole discretion
    • Client must submit original invoice, copy of invoice and supporting documentation to ANAPLANS
    • Client cannot modify the terms of the invoices once they have been sent to ANAPLANS for funding.

    (Clause 3) Purchase Price and Payment

    • Sets the advance rate for purchases
    • Discuss Reserves – when & how released, that it may be used for offsets (chargebacks)
    • Refers to the Discount Rate Schedule attachment (the discount fee and the additional fees after the discount period expires)
    • Describes the sale of invoices to ANAPLANS as an absolute sale

    (Clause 4) Notice of Assignment

    • Advises Client that ANAPLANS will notify their customers of the assignment and payment instructions
    • Advises Client that they should place upon their invoices remittance language directing payment to ANAPLANS
    • Advises Client that in the event proper notification is not acknowledged by customer, the account may not be purchased

    (Clause 5) Security (collateral to secure repayment to ANAPLANS)

    • Advises Client that a lien will be placed against all assets of the Client in favor of ANAPLANS.
    • Authorizes ANAPLANS to file liens as necessary without requiring the signature of Client on the financing statement
    • Client agrees to not further encumber their assets with the exception of inventory in the normal course of business.

    (Clause 6) Seller’s Representations

    Client guarantees that:

    • They are registered to business and are in good standing in the state they reside to do business;
    • they are authorized to enter into this agreement;
    • are not violating anything by which they are contractually bound;
    • that the name on the agreement is correct and
    • that they will not change their name, address, entity status, dba name or state of incorporation without 30 day written notice to ANAPLANS prior to such change.
    • Any trade or assumed name is properly registered and has been provided in writing to ANAPLANS.
    • That accounts are free of any lien, rights of third parties and any other charges
    • Each account is a bona-fide sale, and nothing exists that may affect payment in full of accounts
    • All information provided is accurate
    • That there are no judgments or actions outstanding, pending, or threatened against Client and that their inventory has not been produced in violation of the Fair Labor Standards Act or imported in violation of any United States Custom treaty.
    • All financial records furnished to ANAPLANS are accurate
    • Client will provide upon request any financial statements, agings, etc…to ANAPLANS.
    • Client may be required to furnish a report to ANAPLANS on a monthly basis that no Event of Default exists.
    • Client will notify ANAPLANS immediately upon changing the location where their books and records are kept
    • The invoices are due and payable according to the terms evidenced on the face of each invoice. The invoices are not to a contra account or affiliated account; a consignment or guaranteed sale; C.O.D. or bill and hold sale.
    • Upon the event of default Client assigns to ANAPLANS all right to use any means necessary to collect the collateral held as security
    • All customers are solvent
    • Client has paid all taxes
    • Client will immediately notify ANAPLANS in the event of legal proceedings against Client
    • All funds received from ANAPLANS are to be used for business purposes only
    • All faxes are a duplicate of the original
    • All electronic data communicated is accurate
    • All of Clients Principals are fully responsible for the accuracy contained in each Schedule of Accounts offered to ANAPLANS.
    • Client agrees to execute certain IRS forms, if ANAPLANS deems necessary

    (Clause 7) Recourse to Client

    In the event that:

    • An invoice is not paid when due
    • A customer disputes an invoice
    • A customer becomes insolvent
    • ANAPLANS determines that the Account has become uncollectible
    • Then ANAPLANS can require Client to repurchase the account. This can be accomplished by Client remitting payment to ANAPLANS or ANAPLANS purchasing a substitute invoice, or ANAPLANS charging the invoice back to the reserve.

    (Clause 8) Power of Attorney

    Client authorizes ANAPLANS to:

    • sign, endorse and deposit payments made payable to Client;
    • receive, open and dispose of mail;
    • change the address in order to re-route the delivery of all mail to ANAPLANS;
    • strike out any remittance advice and replace with that of ANAPLANS;
    • demand and sue and compromise in order to collect on any purchased account;
    • compromise, prosecute or defend anything in the agreement and
    • to execute any documents related to perfecting ANAPLANS’s security interest in the client.

    (Clause 9) Payments Received by Client

    • In the event Client receives payment on an Account purchased by ANAPLANS, Client must without delay,
    • notify ANAPLANS;
    • not commingle the payment with Client’s own funds and
    • forward the exact payment to ANAPLANS.
    • If the Client deposits the payment, they will be subject to a penalty equal to 10% of the payment or $1,000 whichever is greater.
    • In the event a factored account returns merchandise to the Client, they must keep merchandise separate from their own property and notify ANAPLANS immediately.

    (Clause 10) Default

    If any of the following occur, it is considered an Event of Default:

    • the failure of client to comply with this agreement
    • any information provided by Client is untrue, incorrect or proved false
    • Failure by client to forward to ANAPLANS payment received on Factored Account (see Clause 9)
    • The failure of client to pay any sums when due to ANAPLANS
    • The client’s business goes into receivership or ceases to do business
    • Client becomes insolvent
    • Client files for bankruptcy
    • An involuntary petition in bankruptcy is applied to the client or a guarantor
    • A tax lien or levy is placed or a notice of lien or levy is made against client or the collateral
    • The client dissolves it’s business
    • The client or guarantor(s) death or in competency occurs
    • ANAPLANS reasonably deems itself insecure
    • If there is a change in ownership of client, or client sells, transfers or assigns it’s ownership interest or is merged with a different entity

    (Clause 11) Remedies Upon Default

    Upon the Event of Default ANAPLANS may:

    • Declare any amounts due as hereby due and payable
    • Notify Accounts not factored and any other entity with which monies may be due to client to remit payments to ANAPLANS. ANAPLANS does not have to post a bond in order to seek equitable relief. Client waives the right to collect attorney’s fees in the event the equitable relief awarded is overturned for any reason.
    • Terminate this agreement
    • Enter the premises of client and take possession of records relating to the collateral.
    • Negotiate payments
    • Exercise all other rights as a secured party

    (Clause 12) Financial Statements

    • Client agrees to allow ANAPLANS during normal business hours to examine their books and records and will furnish to ANAPLANS upon request any documentation which support financial records.

    (Clause 13) Reimbursable Expenses

    • All out of pocket expenses, if any, will be charged to the client. Likely charges include UCC & tax lien searches & filings, bank charges and courier charges.

    (Clause 14) Account Debtor Claims

    • When client is notified of a dispute on an Account, they will notify within ANAPLANS within three days.
    • The client can settle the dispute with the account debtor with ANAPLANS’s approval, with client owing any shortfall to ANAPLANS.
    • ANAPLANS may settle a dispute directly with a customer without client’s approval and client specifically agrees to such settlement and authorizes ANAPLANS to execute said settlement.
    • As in Clause 7 above, client will be charged for any shortfall on a factored account.

    (Clause 15) Attorney’s Fees

    • Client agrees to pay for all legal fees incurred as a result of ANAPLANS’s need to enforce anything in this agreement or any agreement between ANAPLANS and Client.
    • Client waives the right to seek attorney’s fees and costs.

    (Clause 16) Notice

    • Aside from routine communication, any notice required as a result of this agreement shall be in writing

    (Clause 17) Term

    • Agreement is for a one-year term, renewable year to year unless client notifies ANAPLANS in writing within ninety days prior to the end of its current term.
    • ANAPLANS can terminate at any time by giving thirty days written notice. Upon termination client’s amount due will become immediately due and payable. ANAPLANS will retain its security interest in the collateral of the client until all obligations have been paid in full.

    (Clause 18) Indemnification

    • Client will secure ANAPLANS in any liability incurred as a result of this agreement

    (Clause 19) Binding on Future Parties

    • This agreement shall benefit both parties’ successors.
    • Client cannot assign this Agreement without written notice by ANAPLANS.
    • This agreement is not assumable by any entity in a bankruptcy proceeding without written notice by ANAPLANS.

    (Clause 20) No Waiver

    • No waiver given by ANAPLANS shall extend to any other provision in this agreement

    (Clause 21) Severability

    • Every item in this agreement is to considered to be independent of the other items

    (Clause 22) Miscellaneous

    • Client has thirty days after the date of issuance to dispute the validity of ANAPLANS’s records
    • ANAPLANS has the right to litigate in any other county in which it has an office, and client agrees not to challenge the venue selected by ANAPLANS.
    • Client authorizes ANAPLANS to communicate with any shipping company to track shipments.
    • Client agrees there is no fiduciary relationship between ANAPLANS and Client.
    • This agreement is complete and final and may not be amended orally.
    • If client’s principals, officers or directors form a new, similar entity, the new entity will assume the obligations of client under this agreement. ANAPLANS may perfect its security interest in the new entity and notify customers of factor’s lien rights and rights to payments ANAPLANS may notify any lender which may have a security interest in the new entity.
    • If ANAPLANS obtains financing, client consents to ANAPLANS granting their lender its rights under this agreement.
    • Client agrees its representations in this agreement shall benefit any lender of ANAPLANS.
    • Client and ANAPLANS waive their right to a trial by Jury.

    7.2 Personal Guarantee
    ANAPLANS will obtain a Personal Guarantee from each Principal of a client. This document legally binds the individuals to repay advances made by ANAPLANS in the event full payment is not made through the liquidation process.

    ANAPLANS offers another kind of guaranty to its clients. That is the Validity Guarantee or Fiduciary Certificate. This document is similar to the personal guaranty in that it binds the individuals to repay advances made to the client in the event full payment is not made through the liquidation process, but only to the extent that repayment is hindered by fraudulent submissions.

    A Limited Guarantee binds individuals up to a specific dollar amount. ANAPLANS should take great care when this form of guarantee is used that they do not fund an amount over the dollar limit specified in t is agreement.

    A Cross-Corporate guarantee may be used in the event the corporation is affiliated with another credit worthy company. The client would have to be a wholly owned subsidiary of the guaranteeing company, or other consideration must apply before this guarantee is acceptable to ANAPLANS.

    ANAPLANS requires one form of guarantee to be signed by the principals of a client before funding will begin.

    7.3 The Corporate Resolution
    The Corporate Resolution document, signed by an officer of the client legally binds the Corporation into entering into the Purchase & Sale Agreement. The document furthermore acts as an enhancement to the Purchase & Sale Agreement by:

    authorizing ANAPLANS to endorse and deposit checks on behalf of the client,
    assigning the collateral as security,
    The officer’s have the ability to bind the corporation to the agreements.

    7.4 The Directors & Officers Resolution
    The Director’s & Officers Resolution document is a signature form in that all individuals listed have the authority to sign Schedule of Accounts Forms and any other documents deemed necessary by ANAPLANS

    7.5 The Notification Letter
    The Notification Letter signed by both the Client and the ANAPLANS on behalf of ANAPLANS instructs the client’s customers that their accounts have been sold and assigned to ANAPLANS. The letter instructs customers to make all payments to ANAPLANS Inc. and that this arrangement can only be modified by ANAPLANS writing.

    What makes this letter so important to our program is that Article 9, §406 of the Uniform Commercial Code states that:

    An account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor.

    In layman’s terms, once the customer has received the Notification Letter they must pay ANAPLANS. If the customer fails to pay ANAPLANS and instead pays the client direct, they have not discharged their debt to ANAPLANS. They are legally obligated to pay ANAPLANS. If they are unable to retrieve the funds paid to the client, then they will have paid the debt twice.

    Under the UCC/PPSA, ANAPLANS does not have to prove the Notification Letter was received by the customer. ANAPLANS may send out the Notification through regular mail, certified mail, courier or fax. In the event ANAPLANS must seek relief from the customer, we need only prove that the letter was sent under standard operating procedure. ANAPLANS does not need to request the customer has acknowledged the Notification Letter.

    ANAPLANS may use their best judgment on which method they wish to use for the sending of the Notification Letter. If the letter is sent via a method in which there can be third party verification, i.e. courier or certified mail, then ANAPLANS will maintain this verification receipt for as long as the factoring relationship exists.

    If the Notification Letter is sent via fax, then ANAPLANS will be sure that the fax number the letter is being sent to is a true fax number for the customer. ANAPLANS should not rely upon their client to furnish this information; rather they should confirm the fax number directly with the customer. If the Notification Letter is sent via fax, ANAPLANS will maintain a copy of the fax confirmation receipt for as long as the factoring relationship exists.

    It is crucial to the program that ANAPLANS send out notification letters to all customers that the client sells ANAPLANS invoices to both at the beginning of the client relationship and as new customers are added during the life of the factoring relationship.

    Failure to do so may result in a LOSS!

    7.6 The Schedule of Accounts
    The Schedule of Accounts form is used by the client to sell invoices to ANAPLANS. This form will list all the invoices, invoice numbers, dates, customers and amounts they are selling to ANAPLANS. ANAPLANS should monitor each Schedule to confirm that the signature matches with a signature listed on the Directors and Officer’s Resolution. In other words, does the person signing this have the authority to sell these accounts to ANAPLANS?

    7.7 Subordination Agreements
    A Subordination Agreement may be used in the event that other secured parties of record exist against the assets of the client.

    If UCC/PPSA filings are in place in a priority position, then ANAPLANS must seek to obtain subordination agreements or terminations. Forward any subordinations or terminations to the Service Provider for filing.

    ANAPLANS must confirm that ANAPLANS is in a priority position against the A/R of each client.

    ANAPLANS must be the First Secured Party of record before ANAPLANS can advance any funds to the client.

    7.8 The Inter-Creditor Agreement
    In the event a secured party exists, ANAPLANS may enter into an Inter-Creditor agreement with that secured party. This agreement sets out the priorities of interest in the collateral. Furthermore the agreement supplies the responsibilities of each party in the event of a liquidation of the client’s collateral. In no event shall ANAPLANS limit their rights to the accounts receivable of a client.

    7.9 The Financing Statement (UCC-1/PPSA)
    The Financing Statement also known as the UCC-1/ PPSA is the document filed with the recording ANAPLANS’s security in the clients collateral. The Secured Party will be ANAPLANS. The Debtor will be the client. The financing statement will cover the following collateral:

    “all of Seller’s right, title and interest in and to the following, whether now existing or hereafter arising or acquired and wherever located: (a) Accounts, (b) Chattel Paper, (c) Commercial Tort Claims, (d) Deposit Accounts, (e) Documents, (f) Equipment, (g) General Intangibles, (h) Goods, (i) Instruments, (j) Inventory, (k) Investment Property, (l) Supporting Obligations, (m) Letter of Credit Rights, (n) Payment Intangibles, (o) any and all Reserves and all payments (if any) due or to become due to Seller from the Reserves as well as all monies on deposit, holdbacks and credits, (p) all books and records pertaining to all of the foregoing, including but not limited to computer programs, data and lists, and (q) and all Proceeds of the foregoing (collectively the “Collateral”). “

    The Financing Statement will remain as a matter of public record for five years. While many factoring relationships do not exist for that long a period, it is ANAPLANS’s responsibility to track the date of expiration. Our Service Provider should notify ANAPLANS within 90 days of the date of UCC/PPSA expiration on any filings they have made on behalf of ANAPLANS.

    If ANAPLANS is still funding the client near the time of expiration, they must notify the Service Provider to file a continuance statement. A continuance can be filed for an additional five years. It is extremely important for ANAPLANS to have proof that a continuation statement has been filed, else they lose their priority over the clients assets.

    Once the factoring relationship has ended, and ANAPLANS has obtained a General Release from the Client, they should terminate the UCC/PPSA filing. To do so, ANAPLANS must notify the Service Provider and request the UCC/PPSA termination on the client. Once the client has paid in full and has signed the release, ANAPLANS has 90 days in which to terminate their filing or be subject to fines from the regulatory agency responsible for the record filings.

    7.10 Doing Business with a legally valid entity
    ANAPLANS must enter into agreements with a legally valid entity. Types of valid entities are:

    Individuals (Sole Proprietorships)
    Individuals who have not incorporated their business are sole proprietors.

    A personal guaranty is not a required document when ANAPLANS enters into a Purchase & Sale Agreement with an individual. The Purchase & Sale agreement binds the sole proprietor individually; therefore the individual is already personally guaranteeing repayment to ANAPLANS.

    If the prospect operates a sole proprietorship ANAPLANS must obtain the following:

    1. Copy of the individual’s driver’s license or passport,
    2. Copy of the individual’s birth certificate,
    3. For women who are married, both their married name and their maiden name.

    These documents will be used to conduct searches on the sole proprietor. Searches will be done using the person’s full name, first and last name and first and/or middle initials and last name. For married and/or divorced women, additional searches will be done using both their maiden and married names. The approximate cost of these searches cost is an additional $100, which ANAPLANS should obtain from the prospective client prior to asking ANAPLANS’s Service Provider to conduct the search.

    General Partnerships
    When two or more individuals operate an unincorporated business it is called a General Partnership. Each partner is individually liable to ANAPLANS for repayment of advances made.

    If the prospect operates a general partnership ANAPLANS must obtain the following:

    1. Copy of the individual’s driver’s license or passport
    2. Copy of the individual’s birth certificate.
    3. For women who are married, both their married name and their maiden name.

    These documents will be used to conduct searches on the sole proprietor. Searches will be done using the person’s full name, first and last name and first and/or middle initials and last name. For married and/or divorced women, additional searches will be done using both their maiden and married names. The approximate cost of these searches cost is an additional $100 for each party, which ANAPLANS should obtain from the prospective client prior to asking ANAPLANS’s Service Provider to conduct the search.

    Limited Partnerships
    Typically several individuals exist as principals in this type of entity. They are known as either general partners or limited partners. The general partners are individually liable for advances made by ANAPLANS. Limited partners are only liable up to the amount of their investment in the company.

    Limited partnerships require specific searches.

    LLC’s or Limited Liability Companies
    A Limited Liability Company is a company formed by a sole proprietor or one or more members. This entity is not a corporation but does protect its members from personal liability in the obligations of the company. Therefore, guarantees are required prior to funding.

    Corporations
    A Corporation is a legal entity wherein owners have no personal liability. ANAPLANS requires personal or validity guarantees when funding to corporations.

    The Client’s True Identity
    The client must provide proof of their legal name in order for the ANAPLANS to prepare the documentation.

    One item included in the supporting documentation to the Client Application Form allows ANAPLANS to determine the exact legal name of the company. That item is the Articles of Incorporation. This document is required by ANAPLANS to confirm the client’s true identity. Great care should be taken when noting the true corporate name. Any derivation in use may result in invalid documentation.

    7.11 Custom Documentation
    Use of Outside Counsel
    If unique conditions exist, ANAPLANS may seek outside counsel for the preparation and review of custom documentation.

    When consulting outside legal counsel, ANAPLANS should:

    • Ensure that the lawyers have full and complete knowledge of the nature of the transaction. A lawyer can only provide opinions based on facts known to him or her; and
    • When beginning the process of documenting a new credit facility, provide external counsel with all necessary information to ensure the documentation reflects the terms and conditions of the approval.

    Document Preparation
    ANAPLANS is responsible for coordinating the completion of custom documentation. Guidelines to the preparation of documents include:

    • Documents requiring Third Party Involvement should be addressed first.
    • For instance, if a subordination agreement is necessary, ANAPLANS will work with the prior secured party to execute any subordination agreements.
    • ANAPLANS should have a clear understanding of any issue that requires custom documentation.

    7.12 Public Records Searches
    ANAPLANS will have Service Provider search the public records for any UCC/PPSA filings and tax liens of the client. To do so, ANAPLANS must fax or email the Client Application Form and the Articles of Incorporation to Service Provider. The search involves searching the corporate statute, the UCC/PPSA filings, Bankruptcy, and Litigation and judgments.

    The Service Provider will then forward a report to ANAPLANS along with copies of each document. This step can take up to five days to complete. The cost to perform the searches and issue the report is usually between $100 and $500, varying by State, number of pages and country.

    A UCC/PPSA search is an essential procedure in the underwriting of a Client. The Uniform Commercial Code is that section of law which all Secured Transactions are held to. All client’s pledge as security all their assets for the advances made by ANAPLANS. It is imperative that ANAPLANS register as the senior secured party against the accounts of the client. Oftentimes a business may already have their receivables pledged as collateral for other loans and the only way we can discover this is through the UCC/PPSA search process.

    Recent changes to the Uniform Commercial Code statute in all states were enacted in July of 2001. The SP is required to perform a search in the state in which the prospect is incorporated in, not where their corporate office or ‘books and records’ are kept. For instance, the prospect may have their headquarters in Utah, and their corporation is chartered in Nevada. The UCC search will be performed in Nevada.

    During or immediately after the UCC/PPSA Search, ANAPLANS may file their UCC-1/PPSA to establish a priority position, and order a search to reflect the filing.

    Typically if receivables have been pledged to other secured parties, ANAPLANS will seek to have them subordinate their collateral position or payoff the previous lender in full from the proceeds of factoring the client. It will be ANAPLANS responsibility to forward any subordinations or terminations to the SP for filing.

    ANAPLANS must have proof (in the form of a report forwarded by the Service Provider) that ANAPLANS is in a priority position against the A/R of each client.

    ANAPLANS MUST BE IN A FIRST SECURED POSITION AGAINST THE ACCOUNT OF THE CLIENT BEFORE FUNDS CAN BE AVANCED.