Payment and Default procedures

This is a general letter that outlines the payment schedules, our credit and default process for an accepted order.
 
Here is the outline on how we reduce this risk to our group to ensure that we are paid by our buyers:
 
We normally require a downpayment of 30% to 50% of our sales price with an order, with progress payments and/or the full balance to be paid at the end of our manufacturing process, upon final notification by our group advising the buyer that we are prepared to ship.
 
Definition of our ability to ship:
 
Our ability to ship is determined by our group at or near the final stage of our manufacturing process. The normal process we follow is that the equipment, or system being manufactured is in an overall completed stage, and can be readied for packaging and shipment. We always try to setup systems for a full test or a dry test, but that is not part of our acceptance process. testing is offered, but is not a requirement for our orders to be complete. When we are finished with the manufacturing stage we notify the buyer via e-mail, that we are ready to ship. Overall our ability to be ready to ship means that we are at a time in the entire manufacturing process that allows us to be ready to receive containers to begin the packaging of the equipment, or packaging of the shredding system, for shipment.
 
"Ready to ship", or notification that we are ready to ship is a clear statement of fact.
 
It is the responsibility of the buyer, to work directly with our group, to coordinate movement of the container or containers for shipment to and from our plant, to the final destination. It is the responsibility of the buyer to coordinate, with our assistance, the customs services needed for the order to proceed through the entire shipping and delivery process. This coordination with the buyer and his customs representatives, does involve our group. This stage, is one of many critical stages in the order process, that ensures there are no delays in the packaging and shipping process.
 
Many of our shredders, and shredding systems consume a large amount of floor space in our factories, and we must expedite shipment as soon as possible, to make room for other staged orders. Therefore, we are very strict on the final order process, to ensure an orderly movement of machines through our system. We always give sufficient time for buyers to respond to our needs, but many times buyers are not responsive to our needs, and this can often cause delays to our group.
 
Delays that create other serious issues for our company
 
Payment schedules are always outlined in our orders and, these schedules must be met to prevent delays and to ensure proper cash flow for our company.
 
Due to the overall manufacturing cost of these systems and the low margins in our industry, a final payment owed to our group can often be in the millions of dollars. The receipt of these funds as outlined by our group is critical. Prompt payment to our company is a requirement of our group for all of our orders, especially when this involves final payment.
 
When we notify a buyer that the system is complete, sometimes a few weeks before we are ready to begin our packaging and shipping schedule, we allow a 48 hour period for a final payment to be made and received by our group from this notification date. If a final payment is not made, and received by our group, within this time frame then we are automatically in a default mode time period. Lack of a final payment being made on time for a project puts the project in a payment default mode. This default mode must be corrected within 24 hours upon our formal notification, via e mail, or we will be forced to confirm a total and irreversible default. If a total default occurs the order is closed
 
We always retain full and total possession and ownership of our equipment until full payment is made.
 
In the event of a full and formal default we will take immediate action to liquidate the equipment, as our first course of action is to make our group whole. We will try to find another use or another buyer for the defaulted equipment to make our group whole. But, we reserve the right to claim as damages the amount owed as well as the collection and legal cost to recover all of our losses.
 
As outlined above, our exposure can be very high in this business, as this is not a typical retail business being a shredder maker.
 
Due to these facts and due to the nature of this business, we require and demands prompt and proper payment by the buyer, based on “our” terms and conditions, and our needs for each project based on the credit worthy nature of our buyer, as it may evolve through the order process.
 
This document clearly outlines the fact that when we make a formal notification and/or demand for our final payment. That final payment must be made within a 48 hour time after our notification, as outlined above, or a formal and legal default will occur. We have a second grace period of 24 hours to correct the default condition after the first 48 hour grace period if the default is not corrected.
 
Fortunately over 45 years we have only notified a few groups of a payment default, or a few who have ended in a total default.
 
One default notice in 2009 involved almost $840,000.00 but this was eventually paid. One total default was in 2011 for $535,000.00. One total default was in 1993 for $10,000.00. Today, in 2012, due to the wild world economy we must protect our company from non payment accounts.
 
Overall, regardless of the amount owed our group, there are rules that must be followed by the buyer, that are set and established by our company for payment. The buyer does not have any rights or ability to dictate payment schedules, or to change payment schedules, or terms and conditions of the order. We have total control over the payment schedule and can change, any and all payment schedules, without notice, as we see fit to protect our financial interest. Sometimes, we use an escrow of final funds to resolve issues with final payment. But, in todays world, finance and collection of monies can be a difficult task. We do not accept any order based on a letter of credit. If at anytime during the processing of an order, there are actual or perceived issues, regarding our payments, or our payment schedule, we will change the terms of our payment schedule.
 
We must be notified by the buyer, at any and all times, during the order time frame, regarding any and all possible payment issues.
 
if, during the build time period, which can take 3 to 6 months, the buyer becomes insolvent, there is an automatic forfeit of their total order deposit and payments. This can be changed if full payment can be guaranteed for the project, as originally outlined, or as required by our group to satisfy our financial needs, regardless of the original payment terms and schedules.
 
Once again, our payment terms and conditions and schedules can change and can be changed by our group depending on our financial evaluations and credit score, or credit ratings, of the buyer during the build or manufacturing process.
 
The credit score, or credit rating stance of the buyer during the build stage of our project is important to our financial stability and success.
 
Once again, due to the nature of our business, and the high dollar amount outstanding for final payments, we must take proper and aggressive measures at all times to ensure that default does not occur and/or that our exposure is limited. Therefore, we submit this data, to be made with all of our orders, to be made a part of any, and all orders, so that everyone understands our payment and default process. It is strict and it is firm.
Home Warranty / Legal Payment and Default procedures

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