SEC EXHIBIT 10.1
FACTORING AGREEMENT
XXXXXXX FACTORS, INC.
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Gentlemen:
We propose the following agreement with you, effective as of April 29, 1997
wherein we agree to retain you as our sole factor in accordance with the terms,
provisions and conditions as hereinafter stated:
1. The undersigned, hereby sells, assigns, transfers and sets over to you as
absolute owner and you hereby agree to purchase from the undersigned, without
recourse to the undersigned to the extent expressly set forth below, all
Receivables now or hereafter owned by us which are acceptable to you. You
hereby agree to assume the risk of loss resulting from a customer's nonpayment
of an approved Receivable due to the customer's financial inability at maturity
to pay such Receivable. You shall not be responsible, however, for nonpayment
due to any reason other than such inability to pay. The term "Receivables"
means and includes all accounts receivable, notes, bills, acceptances and any
and all other forms of obligations owing to us, whether secured or unsecured,
all proceeds thereof and all of our rights to any merchandise which is
represented thereby (delivered or undelivered), including all of our rights of
stoppage in transit, replevin and reclamation as an unpaid vendor or lienor.
You shall be privileged to enjoy all of the rights and remedies of the seller of
such goods and shall be and become subrogated to all guaranties, collateral and
other rights possessed by us or due to come into our hands, but you shall not be
liable in any manner for exercising or refusing to exercise any rights thereby
bestowed. From time to time we shall provide you with schedules describing all
Receivables created or acquired by us and shall execute and deliver to you at
your offices in the City of New York written assignments of such Receivables to
you and shall furnish at the same time copies of customers' invoices or the
equivalent, together with original shipping or delivery receipts for all
merchandise sold and/or all notes, bills, acceptances or other evidences of
customer indebtedness duly endorsed in blank by us, and any other information or
documents you may call upon us from time to time to submit, all in form
satisfactory to you. Receivables not approved by you as provided below in whole
or in part (including any Receivables outstanding on the date hereof) shall bear
the factoring charge described below, and are hereby assigned to you with full
recourse to the undersigned to the extent and in the respects not so approved.
2. The amounts and terms of each sale to our customers shall be submitted to
you for your credit approval in writing and no sales or deliveries shall be made
without such written approval, which may be withdrawn at any time before
delivery, but in no event shall you have any credit risk on any Receivable,
whether or not approved by you, if the net face amount of such Receivable is
less than $150.00, or the invoice evidences charges for samples supplied to our
customer. Your factoring charge, due and payable at time of purchase, shall be
sixty-two+one-half one hundreds
of one Percent (.625%) of the gross amount of said Receivables, and an
additional one percent (1%) of Receivables from customers who are debtors-in
possession less any trade and cash discounts to customers (which shall be
computed on the shortest terms where optional terms are given). In the event
that the terms of any of our sales exceeds 90 days, you shall receive as to such
sales an additional 1/4 of one percent for each additional 30 days, or portion
thereof, of extended terms or additional dating. The purchase price of
Receivables accepted by you is to be the net fact amount thereof less your
factoring charge. The term "net face amount" means the gross amount of
Receivables, less trade and cash discounts to customers (which shall be computed
on the shortest terms where optional terms are given) and credits and allowances
to customers of any nature. After purchase of Receivables by you, a discount,
credit or allowance may be claimed solely by the customer and the undersigned
will not issue or grant any discounts, credits or allowances to a customer
without your prior consent. AT the time of purchase of Receivables and
periodically thereafter, you may in your sole and absolute discretion make
advances to us and to Stage II Apparel Corp. of Hong Kong Ltd., which, in the
aggregate and at anytime outstanding will not exceed the lesser of (i)
$17,000,000.00 including Letters of Credit (the "Maximum Revolving Amount"), or
(ii) eighty-five percent (85%) of the purchase price, and you will credit to our
account the balance of said purchase rice less any moneys remitted, paid or
otherwise advanced by you for our account and less returns, trade and cash
discounts, credits or allowances of any nature at anytime issued, owed, granted
our outstanding, upon the respective collection of such Receivables, after
adding thereto five(5) banking days to cover mailing time, delays in remittances
and clearance of checks, or, in the case of approved Receivables, upon their
respective uncollectability because of the customer's financial inability at
maturity to pay same. Notwithstanding the foregoing, it is understood that you
may, at our request, from time to time advance a sum that is more or less than
the sum determined by the application of the above percentage of the purchase
price and may, in fact, make advances in excess of the Maximum Revolving Amount
but you are under no obligation to do so; all advances in excess of the
aforesaid percentage, less all applicable deductions, charges, chargebacks and
reserves, and all advances in excess of the Maximum Revolving Amount, are
repayable on demand. Amounts taken by customers for anticipation at an annual
rate in excess of two percent (2%) below the Prime rate (as defined in paragraph
3 hereof) or for excessive periods of time shall be charged to our account by
you. The minimum aggregate factoring charges payable under this Agreement for
each contract year hereof shall be one hundred thousand dollars ($100,000.00),
which , to the extent of any deficiency, shall be chargeable to our account with
you on a monthly basis. You shall be entitled to hold all sums and all property
of the undersigned at any time to our credit or in your possession, or upon or
in which you have a lien or security interest, as security for all of our
obligations at any time owing to you and to each corporation which is at any
time your parent, affiliate, subsidiary or a co-subsidiary of your parent. Such
obligations shall include, without limitation, all obligations to you hereunder
and all obligations for purchases made by the undersigned from any other client
factored or financed by your or by any such parent, affiliate, subsidiary or co-
subsidiary, whether under this agreement or otherwise, no mater how or when
arising and whether due or to become due, and you shall have the right to charge
to our account the amount of all such obligations and pay over such amounts to
such parent, affiliate, subsidiary or co-subsidiary. Recourse to security shall
not at any time be required, and we shall at all times remain liable to you and
such parent, affiliate, subsidiary or co-subsidiary on demand for all loans and
advances (including any advances in excess of the net face amount of
Receivables) to
or for our account and for all of our other obligations to you. You may at your
option reserve an amount of past sales (the "Reserve"), and revise said Reserve
from time to time, if in your sole judgment it is necessary to cover possible
returns of merchandise, deductions or other claims or setoffs made by customers.
3. Subject to the provisions of this Agreement, upon our request, you shall
remit (and at any time in your sole discretion you may remit) any money standing
to our credit on your books in excess of the Reserve. You may charge to our
account interest on any moneys remitted or otherwise advanced by you or charged
to our account hereunder (the "Advances") before the collection of Receivables
or in the case of approved Receivables, before their respective uncollectibility
because of the customer's financial inability at maturity to pay same as above
described, at a rate one-half of one percent (.5%) per annum above the highest
publicly announced "reference", "prime" or "base" interest rate of The Chase
Manhattan Bank, N.A., or The Bank of New York (the "Prime Rate"), (which is not
eight and one-half percent per annum ) computed on the basis of a 360 day year
(the "Effective Rate"). Said Effective Rate shall be increased or decreased
effective the first day of the month following any month in which there is an
increase or decrease in the Prime Rate, such increase or decrease to be in an
amount equal to the increase or decrease in such Prime Rate. Such interest is
due and payable at the close of each month. You will account to us monthly and
each monthly accounting will be fully binding upon us unless we give you written
notice of exceptions within sixty (60) days from its date.
4. We warrant and agree as to each such Receivable that at the time of the sale
or assignment thereof to you hereunder and at all times thereafter: it will be
a bona fide existing obligations created by the absolute sale and delivery of
merchandise or the rendition of services to customers in the ordinary course of
business and will be paid and performed according to the terms provided therein;
all documents delivered to you in connection therewith are genuine; it will be
enforceable against all parties thereto without credit, defense, offset or
counterclaim, real or claimed, whether arising out of the transaction creating
such Receivable or otherwise; and it will be free and clear of liens and
encumbrances. We further warrant and agree as to each such Receivable that at
the time of the sale or assignment thereof to you hereunder we will have good
title thereto and good right to sell, assign, transfer and set over such
Receivable to you. All invoices to customers shall state plainly on the face
thereof that the accounts receivable represented by such invoices have been
assigned and are payable only to you. You may prepare and mail all customers'
invoices, and xxxxxxxx of such customers' invoices by whomsoever done shall
constitute an assignment to you of the Receivables represented thereby whether
or not the undersigned executes any other specific instrument of assignment. We
hereby further warrant and agree that the customer in each instance has received
and will accept the merchandise sold or the services rendered and the invoice
therefor without dispute or claim in any respect whatsoever, including, without
limitation, disputes as to price, terms or quality and defenses based on force
majeure. We will notify you promptly of and shall at our own cost and expense
settle all disputes and claims and will pay you promptly the amount of the
Receivables affected thereby, as well as the amount of any unapproved Receivable
if unpaid at its due date. If you so elect you are to have and are hereby
granted the right and option at all times to settle, compromise, adjust or
litigate al disputes or claims directly with the customer or other complainant
upon such terms and conditions as you deem advisable, and also the right to take
possession of and to sell or cause
to be sold without notice any returned merchandise, at such prices, to such
purchasers and upon such terms as you deem advisable, and in any case to charge
the deficiencies, costs and expenses thereof (including attorneys' fees) to us.
In addition to all other rights hereunder, you may charge against our account he
full net face amount of any Receivable where there is such dispute, defense,
offset, claim and/or counterclaim (regardless of the extent or nature thereof or
whether arising out of the transaction creating such Receivable or otherwise) or
where the customer fails or refuses to pay the amount due for any reason other
than the customer's financial inability at maturity to pay, or if any unapproved
Receivable is unpaid at its due date, but such chargeback shall not be deemed a
re-assignment thereof, and title to such Receivable shall remain in you until
such Receivable is fully paid, settled or discharged. We hereby agree to
indemnify and hold you harmless against and in respect of any and all liability,
loss or expense (including attorneys' fees) arising out of or relating to any
breach of warranty or covenant on our part. Any merchandise which is returned
by customers or otherwise recovered shall be set aside, marked in your name and
held by us as y our trustee. We exonerate you from any liability for any loss,
depreciation or other damage to Receivables unless caused by your willful and
malicious act. We agree to execute such further instruments as may be required
or permitted by any law relating to notices of or affidavits in connection with
assignments of accounts receivable and to cooperate with you in the filing or
recording and renewal thereof. As additional security for all of our
obligations to you, as hereinabove defined, the undersigned hereby grants you a
continuing security interest in all Accounts, General Intangibles and Contract
Rights (as said terms are defined in Article 9 of the Uniform Commercial Code)
now existing or hereafter acquired by us and all proceeds thereof. Each sale of
Receivables hereunder shall constitute and be a transaction separate from and
independent of each other, but all such transactions shall be subject to and
governed by each and every of the terms, provisions and conditions of this
agreement. During the term of this agreement we shall not sell, negotiate,
pledge or assign or grant any security interest in any Receivables, Accounts,
General Intangibles, Contract Rights or inventory to any one other than you
without your prior consent, nor shall we grant or permit to exist without your
prior consent any mortgage, pledge, security interest, encumbrance or lien of
any kind upon any of our property, except liens for taxes not yet due, liens
incidental to our business which were not incurred in connection with the
borrowing of money or obtaining of advances or credit and which do not in the
aggregate materially detract from the value of our assets or impair the use
thereof in the operation of our business. We authorize you to sign our name and
file in the public office any Financing Statements or other instruments which
may be required to perfect your interest hereunder. We appoint Xxxxxxx X.
Xxxxxx or any other person whom you may designate as our attorney with power:
to endorse our name on any checks, notes, acceptances, money orders, drafts or
other forms of payment or security that may come in your possession; to sign our
name on any invoice or xxxx of lading relating to any Receivable, on drafts
against customers, on schedules of assignment of Receivables, on notices of
assignment and public records, on verification of accounts and on notice to
customers; to notify the post office authorities to change the address for
delivery of our mail to an address designated by you; to receive, open and
dispose of all mail addressed to us; to send requests for verification of
accounts to customers; and to do all other things you deem necessary to carry
out this Agreement. We hereby ratify and approve all acts of the attorney and
neither you nor the attorney will be liable for any acts of commission or
omission, nor for any error of judgment or mistake of fact or law. This power,
being coupled with an interest, is irrevocable so long as any Receivable sold to
you
remains unpaid or any money remains due to you from us. We shall immediately
place notations upon our books of account to disclose the assignment of all
Receivables, accounts, general intangibles and contract rights to you.
5. In the event of any breach by us of any provision and/or upon the
termination of this agreement, the undersigned will repay upon demand all our
obligations to you and in addition thereto all costs and expenses incurred to
obtain or enforce payment of any obligation of the undersigned to you, or in the
prosecution or defense of any action or proceeding either against you or us
concerning any matter resulting from this Agreement and/or the Receivables
and/or any of our obligations to you, including, without limitation, to defend
successfully, in whole or in part, any and all actions or proceedings brought by
the undersigned. In addition, we agree to reimburse you for the amount of all
filing and search fees, reasonable attorneys fees, cost and expenses incurred by
you in connection with the negotiating and closing of this agreement and any
ancillary documents issued in connection herewith and modifications and
additions to any of them. We shall also pay your customary charges for all
services performed by you for us at our request and all banking facility charges
incurred in connection with the opening and operation of our account with you,
and we shall also pay you your customary charges for any field examination,
collateral analysis or other business analysis, the need for which is determined
by you, plus all costs and disbursements incurred by you in the performance of
such examinations or analysis. If any remittances are made directly to us, we
shall hold the same as your property and immediately deliver them to you in
their original form. We hereby waive presentment and protest of any instrument
and notice thereof, notice of default and any other notices to which we might
otherwise be entitled. All sales of Receivables to you by us shall be deemed to
include all of our right, title and interest to all of our books, records, files
and all other data and documents relating to each Receivable. If any tax by any
governmental authority is imposed on any transaction between us, or in respect
to sales or the merchandise affected by such sales, which you are or may be
required to withhold or pay, we agree to indemnify and hold you harmless in
respect of such taxes, and we will repay you the amount of any such taxes, which
may be charged to our account.
6. We warrant that we are solvent and will so remain during the terms of the
Agreement. We agree to furnish to you year-end financial statements certified
by our regularly employed Certified Public Accountant, such unaudited financial
statements and financial information as you shall reasonably request, and, on
each anniversary hereof, a list of our shareholders, officers and directors.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of New York applicable to contracts to be performed wholly within
the State of New York and shall have an initial term of one year from its
effective date and thereafter shall be automatically renewed for successive
periods of one year unless terminated by us at the conclusion of its initial
term or any renewal term by giving you at least sixty (60) days prior written
notice; provided, however, that you may terminate it at any time during the
initial term or any renewal term by giving us at least sixty (60) days prior
written notice. The mailing of a registered or certified letter of notice
addressed by one party to the other at its usual address shall constitute
sufficient notice, and the termination shall be effective on the appropriate
date specified in such letter. Notwithstanding the foregoing, you may terminate
this Agreement, without notice, upon the occurrence of any one or more of the
following events (an "Event of
Default"): (a) default in the payment or performance, when due or payable, of
any payment required under this Agreement or under any future agreement or
supplement with you or under any agreement to which we are a party with third
parties; (b) any warranty, representation, or other statement made or furnished
to you by us or on our behalf or by any guarantor of our obligations hereunder
or in connection herewith or in any instrument furnished in compliance with or
in reference to this Agreement proves to have been false or misleading in any
material respect when made or furnished or becomes false in any material
respect; (c) e fail or neglect to perform, keep or observe any term, provision,
condition, covenant, warranty or representation contained in this Agreement or
in any other agreement between us or any rider or supplement which is required
to be performed, kept or observed by us; (d) any statement, report, financial
statement, or certificate made or delivered by us, or by any of our officers,
employees or agents, to you is not true and correct in any material respect; (e)
the imposition of a lien or encumbrance on any of our assets, including the
Receivables, or the making of any levy, seizure, or attachment on all or any of
our assets, including the Receivables; (f) any material adverse change in our
financial condition or the financial condition of any guarantor of our
obligations hereunder; (g) we or any guarantor of our obligations hereunder
become insolvent, or unable to meet our debts as they mature, or fail, suspend
or go out of business or a case is commenced under the Bankruptcy Code or an
order for relief in a case under the Bankruptcy Code is entered with respect to
us or any such guarantor, or a custodian or receiver (or other court designee
performing the functions of a receiver) is appointed for or takes possession of
either our or any such guarantor's assets or affairs; (h) we or any guarantor of
our obligations hereunder cease to conduct our business as now conducted or are
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of our business
affairs; (i) a notice of any lien, levy or assessment is filed of record with
respect to all or any of our assets by the United States, or any department,
agency or instrumentality thereof, or by any state, country, municipal or other
governmental agency, including, without limitation, the Pension Benefit Guaranty
Corporation, or if nay taxes or debts owing at any time or times hereafter to
any one of them becomes a lien or encumbrance upon any of the Receivables or any
of our other assets and the same is not released within thirty (30) days after
the same becomes a lien or encumbrance; (j) you shall in good xxxxx xxxx
yourself insecure or unsale; (k) any guaranty given you with respect to our
obligations is limited or terminated or otherwise deemed unenforceable or
invalid; (l) death of a guarantor of our obligations hereunder or in connection
herewith which guaranty is not replaced by a guarantor, acceptable to you in
your sole discretion; (m) we shall fail to pay our taxes when due unless such
taxes are being contested in good faith by appropriate proceeding and with
respect to which adequate reserves have been provided on our books; (n) should
there be a sale or transfer of all or substantially all of our assets or any
material change in our shareholdings; or (o) should our Tangible Net Worth (as
customarily defined under GAAP) be less than $4,000,000.00; or (p) should our
Working Capital (as customarily defined under GAAP) but including all marketable
securities whether current or long term be less than $2,600,000.00. Upon the
effective date of termination for whatever reason, all moneys chargeable to our
account under this Agreement shall be immediately due and payable without
further notice or demand. Notwithstanding termination, until all your rights
and all our obligations hereunder (including without limitation the payment in
full of all moneys chargeable to our account under this Agreement and the
provision of an indemnity as provided in the last sentence of this Agreement)
have been fully satisfied, (i) we shall continue to assign to you and
grant you a security interest in all Receivables then existing or thereafter
arising, shall not factor or assign Receivables, or grant a security interest
therein, to any other person or entity, shall state on the fact of all invoices
that the Accounts Receivable represented by such invoices have been assigned and
are payable only to you, and shall immediately deliver any remittances to you in
their original form, (ii) all of our obligations and all of you rights and
powers with respect to Receivables then existing or thereafter arising, with
respect to other security then existing thereafter arising or acquired, and with
respect to transactions or events occurring prior to the effective date of such
termination shall be unaffected and unimpaired by such termination, and (iii)
all of our representations, warranties, covenants and agreements and all other
provisions binding upon us contained herein shall survive and continue in full
force and effect, and shall be fully operative.
7. Failure by you to exercise any right, remedy or option under this Agreement
or delay by you in exercising the same will not operate as a waiver; no waiver
or consent by you will be effective unless it is writing and then only to the
extent specifically stated. This Agreement cannot be changed or terminated
other than by a writing signed by the party to be charged, is our entire
contract, and is for the benefit of and binding upon the parties hereto and
their respective successors and assigns, heirs, executors, administrators and
personal representatives. Your rights and remedies under this agreement will be
cumulative and not exclusive of any other right or remedy which you may have.
Both you and we waive all right to a trial by jury in any litigation relating to
transactions under this Agreement, supplements hereto and any related
agreements, and we agree not to assert any counterclaim of any nature in such
litigation. In the event that you cease to act as factor for us hereunder, we
agree to furnish to you an indemnity satisfactory to you against any item which
could be charged to use under the terms hereof which may in your sole and
absolute discretion include the retention of any property held by your or the
holding by you without interest from the termination of any balance standing to
our credit, as security for our obligations hereunder.
ATTEST: Very truly yours,
STAGE II APPAREL CORP.
/s/ Xxxxxxx Xxxxxxx By: /s/ Xxxx Xxxxx
Xxxxxxx Xxxxxxx, Secretary Xxxx Xxxxx, Chairman of the Board
(Seal) Date: April 10, 1997
Address: 000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
ATTEST:
Accepted at New York, N.Y.
XXXXXXX FACTORS, INC.
/s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, Secretary/Treasurer Xxxxxxx X. Xxxxxxx, Chairman
(Seal) Date: April 10, 1997
