EXHIBIT 10.20
FORM OF FACTORING AGREEMENT - INVENTORY SUPPLEMENT
(WITH ADVANCES)
THIS FACTORING AGREEMENT - INVENTORY SUPPLEMENT (this "SUPPLEMENT"), made
and executed this ____ day of ________, 2000, by and between AVID SPORTSWEAR,
INC., a California corporation (the "CLIENT"); and GE CAPITAL COMMERCIAL
SERVICES, INC. (the "FACTOR").
1. This is a Supplement to that certain Factoring Agreement, dated of even
date herewith (such Factoring Agreement, as amended, modified, supplemented or
restated from time to time, being herein called the "AGREEMENT") between Client
and Factor. This Supplement is hereby incorporated into the Agreement and is
made a part thereof.
2. All capitalized terms used in this Supplement without definition shall
have the meanings ascribed to such terms in the Agreement. In addition to the
terms defined elsewhere in this Supplement or in the Agreement, the following
terms shall have the following meanings:
"CONTRACT TERM" - the period from the date that the Agreement becomes
effective until the termination thereof by Client or Factor in accordance with
paragraph 17 of the Agreement.
"ELIGIBLE INVENTORY" - Client's Inventory consisting of finished goods
which in each case (i) is readily marketable in its current form, (ii) is in
good, new and saleable condition and not spoiled, obsolete or unmerchantable,
(iii) is subject to Factor's duly perfected first priority lien, (iv) is located
at one of Client's owned or leased facilities listed on SCHEDULE A hereto,
provided, however, in the case of such Inventory located at a leased facility of
Client, no such Inventory shall be Eligible Inventory unless Client shall have
procured for Factor's benefit a written agreement of the owner of such facility,
in form and substance acceptable to Factor, to waive for the benefit of Factor
any lien or security interest which such owner may at any time have in such
Inventory and to afford Factor access to and the right to repossess or take
possession of such Inventory; (v) is not subject to any license or other
agreement that would condition or restrict Client's or Factor's right to sell or
otherwise dispose of such Inventory, (vi) meets all standards imposed by any
governmental agency or authority, (vii) conforms in all material respects to the
covenants, warranties and representations of Client set forth in this
Supplement, and (viii) is deemed by Factor, in its discretion, to be Eligible
Inventory. Work in process shall not be deemed Eligible Inventory.
"INVENTORY" - all of Client's inventory, including, without limitation,
all goods intended for sale or lease by Client, or for display or demonstration;
all work in process; all raw materials and other materials and supplies of every
nature and description used or which might be used in connection with the
manufacture, printing, packing, shipping, advertising, selling, leasing or
furnishing of such goods or otherwise used or consumed in Client's business,
whether now owned or hereafter acquired by Client, and wherever located.
"INVENTORY ADVANCES" - the loans and advances made from time to time by
Factor to Client under this Supplement.
"INVENTORY LINE AMOUNT"- the sum of _______________________ Dollars
($____________).
"INVENTORY BORROWING BASE" - at any date of the determination thereof, an
amount equal to (i) ________ percent (__%) of Client's Eligible Inventory, at
such date, calculated on the basis of lower of cost or market with cost
calculated on a first-in, first-out basis, less (ii) reserves with respect to
such matters, events, conditions or contingencies as to which Factor, in its
discretion, determines should he established from time to time.
"INVENTORY COLLATERAL" - as defined in Section 3 of this Supplement.
3. As security for all of the Obligations (including the Inventory
Advances, Factor Guaranties and Advances under the Agreement), Client hereby
pledges and grants to Factor a continuing general lien on and security interest
in all following property and interests in property of Client, whether now owned
or hereafter acquired and wheresoever located (the "INVENTORY COLLATERAL"):
(a) All Inventory;
(b) All cash and non-cash proceeds of the Inventory; and
(c) All books and records (including, without limitation, credit
files, computer programs, print-outs, and other computer materials and
records) of Client pertaining to any of the types or items of property
described in any of clauses (a) through (b) above.
4. Factor's lien and security interest shall extend and attach to
Inventory which is presently in existence and which is owned by Client or in
which Client has an interest, and all Inventory which Client purchases or in
which Client may acquire an interest at any time and from time to time in the
future, whether such Inventory is in transit or in Client's constructive, actual
or exclusive occupancy or possession or not, or held by Client or others for
Factor's account and wherever the same may be located, including, but without
limiting the generality of the foregoing, all Inventory which may be located on
Client's premises or upon the premises of any carriers, forwarding agents,
truckers, warehousemen, vendors, selling agents, finishers, converters or other
third parties who may have possession of the Inventory.
5. Upon Client's request at any time during the Contract Term, Factor may
make Inventory Advances to Client, on a revolving credit basis, at Factor's sole
discretion, up to a maximum principal amount of such Inventory Advances
outstanding at any time equal to the lesser of (1) the Inventory Line Amount or
(2) the Inventory Borrowing Base at such time. If Factor so requires, Client
will execute a note or notes or other instruments of indebtedness in form
satisfactory to Factor evidencing the Inventory Advances made to Client
hereunder. Client shall pay interest on the outstanding Inventory Advances at a
rate equal to the Governing Rate. Interest will be calculated on a daily basis
(computed on the actual number of days elapsed over a year of three hundred
sixty (360) days) and shall be payable on the last day of each month. The
applicable Governing Rate for the balance of the calender month during which
this Supplement becomes effective shall be based on the Index Rate in effect on
the last day of the month preceding the date of this Supplement and the
applicable Governing Rate for each month thereafter shall be based on the Index
Rate in effect on the last day of the preceding calendar month. However, in no
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event shall the rate of interest agreed to or charged to Client hereunder exceed
the maximum rate of interest permitted to be agreed to or charged to Client
under applicable law. All of the Inventory Advances shall be payable by Client
upon the earlier of the expiration of the Contract Term or Factor's demand.
Recourse to the security for the Inventory Advances will not be required at any
time.
6. Client warrants and represents to Factor that all Inventory is and will
be owned by Client, free of all other liens, security interests and
encumbrances; that the lien and security interest created hereby is and shall at
all times be a first and only lien on the Inventory; that Client has the
unrestricted right and power to enter into this Supplement and grant Factor a
lien and security interest on the Inventory Collateral. Client shall at all
times keep the Inventory Collateral at the locations set forth on schedule A
attached hereto except for sales in the ordinary course of business. Client
will, at Client's sole expense, forever warrant and defend the Inventory
Collateral against any and all claims or demands of any other person, firm,
entity or corporation adverse to Factor's interest therein.
7. Factor's lien on the Inventory shall continue through all stages of
manufacture and shall, without further act, attach to goods in process, to
finished goods, to the accounts receivable or other proceeds resulting from the
sale or other disposition thereof and to all such Inventory as may be returned
to Client by customers. From time to time hereafter, Client shall provide Factor
with one or more separate written statements, dated and signed by Client,
describing, designating, identifying and evaluating all Inventory now and
hereafter owned by Client, confirming Factor's lien and security interest. Upon
the sale, exchange, or other disposition of the Inventory, the security interest
and lien created and provided for herein shall continue in and attach to the
instruments for the payment of money, accounts, contract rights, documents of
titles, shipping documents, exchange or disposition, including Inventory
returned or rejected by customers or repossessed by either Client or Factor. As
to any such sale, exchange or disposition, Factor shall have all of the rights
of an unpaid seller, including stoppage in transit, replevin and reclamation.
8. Client will promptly pay, when due, all taxes, assessments, claims or
other charges levied or assessed upon the Inventory. In the event Client fails
to pay such taxes, assessments, claims or other charges or fails to keep the
Inventory Collateral free from any other lien or security interest, Factor may
on Client's behalf make expenditures for such purposes and any amount so
expended shall be an Obligation secured hereby to be repaid with interest at the
rate applicable to the Inventory Advances.
9. Except for sales made in the regular course of Client's business for so
long as no Event of Default shall exist, Client shall not sell, encumber or
dispose of or permit the sale, encumbrance or disposal of any Inventory
Collateral without Factor's prior written consent. As sales are made in the
regular course of business, Client shall, in accordance with the provisions of
the Agreement, immediately execute and deliver to Factor schedules and
assignments of accounts receivables created by Client that are sold and assigned
to Factor under the Agreement. If sales are made for cash, Client shall
immediately deliver or cause to be delivered to Factor the identical checks,
cash or other forms of payment which Client receives. All payments received by
Factor on account of cash sales of Inventory, as well as on account of accounts
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receivable sold and assigned by Client under the Agreement, will be applied
against the Obligations in accordance with the provisions of the Agreement.
10. If any Inventory remains in the possession or control of any of
Client's agents or processors, Client shall notify such agents or processors of
Factor's lien, and upon Factor's request shall instruct them to hold all such
Inventory for Factor's account and subject to Factor's instructions. Client
agrees to maintain books and records pertaining to the Inventory Collateral in
such detail, form and scope as Factor shall reasonably require. On the 15th and
30th day of each month during the term of the Agreement, Client shall deliver to
Factor an inventory report describing all existing Inventory by location, type,
quantity and quality, and describing any event which has had or may have a
material adverse effect on the value of the Inventory or on the lien and
security interest granted to Factor herein. A physical listing of all Inventory,
wherever located, shall be taken by Client whenever reasonably requested by
Factor, and a copy of each such physical listing shall be supplied to Factor.
Factor may examine and inspect the Inventory Collateral at any time during
regular business hours. Client will execute and deliver to Factor from time to
time, upon demand, such supplemental agreements or documents relating to the
Inventory Collateral in order that the full intent and purpose of this
Supplement may be carried into effect.
11. At Client's sole expense, Client shall keep the Inventory (whether or
not in transit) continuously insured in amounts not less than its full insurable
value by a reputable and highly rated insurance company or companies acceptable
to Factor in its reasonable discretion against loss or damages from fire,
hazards included within the term "extended coverage", theft and such other risks
as Factor may require. Each insurance policy shall provide under a long form
loss payable clause that loss and proceeds thereunder shall be payable to Factor
as its interest may appear, shall provide at least ten (10) days' written notice
of cancellation to Factor, and shall specify that the interest of Factor shall
not be impaired or invalidated by any act or neglect of Client or the owner of
the Inventory or by the occupation of the premises for purposes more hazardous
than are permitted by such policy. Client shall deliver to Factor all such
insurance policies or other evidence of compliance satisfactory to Factor and
Client, shall renew each policy at its own expense and shall deliver
satisfactory evidence thereof to Factor not less than thirty (30) days before
its expiration date. If Client fails to do so, Factor may procure such insurance
and the cost of such insurance shall be additional Obligations secured hereby
and payable with interest at the interest rate applicable to the Inventory
Advances. Factor may act as attorney-in-fact for Client in obtaining, adjusting,
settling and canceling such insurance and endorsing any instruments relating
thereto, and in the event of loss or damages to the Inventory, Factor shall have
the option to apply the insurance proceeds to the Obligations (whether or not
matured) or to the repair or replacement of the Inventory after receiving proof
satisfactory to Factor of such repair or replacement.
12. If an Event of Default shall occur, or if for any reason the Agreement
is terminated, then Factor, without demand or notice, may declare all of the
Obligations immediately due and payable (notwithstanding that the maturity date
or dates expressed in any evidence of such indebtedness may be otherwise) and
Factor may foreclose its lien or security interest in the Inventory Collateral
in any way permitted by law, and shall have, without limitation, the remedies of
a secured party under the Uniform Commercial Code as enacted in California.
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Factor may thereupon enter Client's premises without legal process and without
incurring liability to Client and may remove the Inventory Collateral to such
place as Factor may deem advisable, or Factor may require Client to assemble and
make the Inventory Collateral available to Factor at a convenient place, or take
and maintain possession on Client's premises and, with or without having the
Inventory Collateral at the time or place of sale, Factor may sell or otherwise
dispose of all or any part of the Inventory Collateral whether in its then
condition or after further preparation or processing, either at public or
private sale or at any broker's board, in lots or in bulk, for cash or for
credit, at any time or place, in one or more sales, and upon such terms and
conditions as Factor may elect. Client agrees that five (5) days written notice
to Client of any public or private sale or other disposition of the Inventory
Collateral shall be reasonable notice thereof. At any such sale Factor may be
the purchaser. If any Inventory Collateral shall require rebuilding, repairing,
maintenance, preparation, or is in process or other unfinished state, Factor
shall have the right, at Factor's option, to do such rebuilding, repairing,
preparation, processing or completion of manufacturing, for the purpose of
putting the Inventory Collateral in such saleable form as Factor shall deem
appropriate. Factor is hereby granted a license or other right to use, without
charge, Client's labels, patents, copyrights, rights of use of any name, trade
secrets, tradenames, trademarks and advertising matter, or any property of a
similar nature, as it pertains to the Inventory, in advertising for sale and
selling any of the Inventory, and Client's rights under all licenses and all
franchise agreements shall inure to Factor's benefit.
13. In the event of any sale or other disposition of the Inventory, the
proceeds from any sale shall be applied first, to the costs, expenses and
attorneys' fees incurred by Factor in collecting the Obligations, enforcing the
rights of Factor under the Agreement and this Supplement and collecting,
retaking, completing, protecting, removing, storing, repairing, advertising and
finishing for sale, selling and delivering any Inventory, and all other expenses
of sale; second, to the interest due upon any of the Obligations; and third, to
the principal of the Obligations in such order as Factor may determine. Any
deficiency will be paid to Factor forthwith upon demand and any surplus will be
paid to Client or other person legally entitled thereto. The enumeration of the
foregoing rights is not intended to be exhaustive and the exercise of any right
shall not preclude the exercise of any other rights, all of which shall be
cumulative.
14. To the extent that any of the Obligations are now or hereafter secured
by property other than the Inventory Collateral or by the guaranty, endorsement
or property of any other person, firm or corporation, then Factor shall have the
right to proceed against such other property, guarantor or endorser, and Factor
shall have the right in its sole discretion to determine which rights, security,
liens, security interests or remedies Factor shall at any time pursue,
relinquish, modify or take any other action with respect thereto, without in any
way modifying or affecting any of them or any of Factor's rights hereunder.
15. The lien, rights and security interest granted to Factor hereunder are
to continue in full force and effect, notwithstanding the termination of the
Agreement, until the payment in full of all of the Obligations, and Factor's
delay or omission to exercise any such lien, right or security interest shall
not be deemed a waiver thereof or of any other right, lien or security interest
unless such waiver be in writing and signed by Factor. A waiver on one occasion
shall not be construed as a bar to or waiver of any other rights or remedies on
any future occasion.
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16. Client agrees to execute and deliver to Factor all financing statements
provided for by the Uniform Commercial Code and all other documents or
instruments which may be required by law or which Factor may reasonably request
to perfect its first priority security interest hereunder and to cooperate with
Factor in the filing, recording or renewal thereof, and to pay all filing and
recording fees and expenses related thereto, and Client authorizes Factor and
any person whom Factor designates as Client's attorney with power to sign
Client's name thereon, if Client declines to do so. This power being coupled
with an interest is irrevocable as long as Client is indebted to Factor in any
manner.
17. This Supplement, which is subject to modification only in writing, is
supplementary to and is to be considered as a part of the Agreement and shall
take effect when accepted and signed by Factor. This Supplement shall be
interpreted according to the laws of the State of California and shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns. Any notices, demands, consents, or other writings or
communications permitted or required by this Agreement shall be given in the
manner and to the address as set forth in the Agreement.
18. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, FACTOR AND CLIENT HEREBY WAIVE, IRREVOCABLY AND UNCONDITIONALLY, TRIAL BY
JURY IN ANY ACTION BROUGHT ON, UNDER OR BY VIRTUE OF OR RELATING IN ANY WAY TO
THE AGREEMENT OR THIS SUPPLEMENT OR ANY OF THE OTHER DOCUMENTS EXECUTED IN
CONNECTION HEREWITH, OR ANY CLAIM, DEFENSE, RIGHT OF SETOFF OR OTHER ACTION
PERTAINING HERETO, OR TO ANY OF THE FOREGOING, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE.
IN WITNESS WHEREOF, the parties hereto have duly executed this Supplement
on the day and year first above written.
AVID SPORTSWEAR, INC.,
a California corporation
By:_______________________________________
Title:_________________________________
Accepted in Los Angeles, California:
GE CAPITAL COMMERCIAL SERVICES, INC.
By:_________________________________
Title:___________________________
Date: ________ ___, 2000
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SCHEDULE A
TO
FACTORING AGREEMENT - INVENTORY SUPPLEMENT
SCHEDULE OF ELIGIBLE INVENTORY LOCATIONS
----------------------------------------
1. 00000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
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