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EXHIBIT 10.3
G.E. CAPITAL FIRST FACTORS
FACTORING AGREEMENT
THIS FACTORING AGREEMENT (this "Agreement"), made and executed this
10th day of November, 1998, by and between JALATE, LTD. (the Client); and GE
CAPITAL FIRST FACTORS CORPORATION (the "Factor").
1. Appointment. Client appoints Factor as its sole factor with respect to
all sales of its merchandise or rendition of services to customers and hereby
offers to sell and assign only to Factor, as absolute owner, all Accounts
Receivables arising out of such sales or services, including all such sales or
services arising under any trade names or through any division or selling agent.
"Accounts Receivable" shall mean and include accounts, contract rights,
instruments, chattel paper, general intangibles, returned or repossessed goods
arising out of or relating to the sale or other disposition of goods at any time
or from time to time, all proceeds thereof and merchandise represented thereby.
The assignment of Accounts Receivable to Factor shall vest in Factor all of
Client's rights, securities, guaranties and liens with respect to each Account
Receivable, including all rights of stoppage in transit, replevin, reclamation,
and all claims of lien filed by Client or held by Client on personal property,
and all rights and interest in the merchandise sold, and all of Client's
defenses and rights of offset with respect to any payments received by Factor on
Accounts Receivable, but Factor shall not be obligated to, and shall not be
liable for, exercising or refusing to exercise any rights granted to Factor
hereby.
2. Purchase of Accounts Receivable. Factor agrees to purchase from Client
at the office of Factor all Accounts Receivable first approved by Factor in
writing as to credit risk and terms of sale (each such approved Account
Receivable being herein called a "Factor Risk Account Receivable"). All orders
from customers including the amount and terms of each proposed sale or service
to such customers shall be submitted in advance of purchase or rendition of
service to Factor for prior written approval, which may be granted or withheld
at Factor's sole discretion. Factor's approval is subject to withdrawal either
orally or in writing at any time prior to delivery of merchandise or rendition
of services, and shall be deemed no longer effective in any event if Client's
delivery of merchandise or rendition of services is made more than thirty (30)
days beyond the date specified for such delivery or rendition in the terms of
sales submitted to Factor for its approval; or more than thirty (30) days from
the date of Factor's approval if no delivery or rendition date has been
specified. If more than 35% of the aggregate amount of Factor Risk Accounts
Receivable outstanding at any time shall be due and payable from one customer,
then to the extent that such percentage amount exceeds 35%, the excess shall be
deemed to be Client Risk Accounts Receivable. Submission of orders for Factor's
prior written approval shall not be required with regard to a sale made by
Client in compliance with any customer credit line which may from time to time
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be issued Client by Factor in its sole discretion, provided that shipments are
made prior to the expiration date of the credit line approval. Any customer
credit line issued by Factor may be amended or withdrawn by Factor in whole or
in part at any time and for any reason without advance notice. The amount of all
Accounts Receivable of each customer as to which Factor shall have approved a
customer credit line shall, in the order in which they have arisen, be treated
as Factor Risk Accounts Receivable up to the limit of the customer credit line
in effect from time to time. Upon the receipt of payment from or issuance of
credit to a customer with respect to a Factor Risk Account Receivable, the
Accounts Receivable of such customer in excess of the customer credit line
shall, to the extent of such payment or credit and in the order in which they
have arisen, be treated as Factor Risk Accounts Receivable, unless prior to such
payment or credit Factor shall have withdrawn the credit line approval. Factor's
withholding or withdrawing of a customer order approval or credit line approval
shall at all times be in Factor's sole discretion, and Factor's actions with
regard thereto shall not render Factor liable to Client in any respect for
damages or otherwise. Subject to Client's warranties and representation herein
contained, Factor will assume the credit loss on each Factor Risk Account
Receivable if the customer, after receiving and accepting delivery of goods or
services, fails to pay in full the Factor Risk Account Receivable on its longest
maturity solely because of its financial inability to pay. If, however, such
failure to pay is due in whole or in part to any other cause, Factor shall not
be responsible and shall have full recourse to Client. Factor at its option may
purchase Accounts Receivable not approved as to credit risk or terms of sale
(each such Account Receivable not approved by Factor being herein called a
"Client Risk Account Receivable"), but each purchase of a Client Risk Account
Receivable shall be with full recourse to Client and Client agrees to pay Factor
on demand for each Client Risk Account Receivable.
3. Purchase Price. The purchase price of each Account Receivable (the
"Purchase Price") is the gross amount of the Account Receivable, less any
discounts made available or extended to the customer (which shall be computed on
the shortest terms where optional terms are given), returns and allowances of
any nature, and Factor's commission. After purchase of an Account Receivable by
Factor, a discount, credit, unidentifiable payment or allowance may be claimed
solely by the customer, and if not so claimed, such discount, credit, payment or
allowance shall be the property of Factor.
4. Client Reserve Account. Factor shall establish on its books in Client's
name a reserve account (the "Reserve Account") which Factor shall credit with
the gross amount of all Accounts Receivable purchased by Factor from Client and
which Factor shall debit with all advances made to Client or on its behalf, as
well as all credits, discounts available to Client's customers, anticipations
earned by Client's customers, factoring charges, interest and any other amounts
chargeable to Client under this Agreement or any supplement hereto or any other
agreement between Client and Factor. Factor shall furnish Client with advices of
all credits and debits to the Reserve Account. Factor shall furnish Client with
a monthly statement of its Reserve Account, and, unless exception is taken to
this statement in writing mailed to Factor within thirty (30) days after receipt
by Client, the monthly statement shall be deemed correct and conclusively
binding upon Client.
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5. Remittance of Funds to Client. As goods are shipped and Accounts
Receivable, evidenced by invoices and shipping documents, are submitted to
Factor with duly executed assignment schedules, Factor may, in its sole
discretion, from time to time at Client's request make advances to Client
against the Purchase Price of Accounts Receivable purchased by Factor hereunder,
less a reserve equal to ten percent (10%) of all such unpaid Accounts
Receivable. Factor retains the right to increase such reserve from time to time
if, in Factor's discretion, the prospect of collection of the outstanding
advances or any other indebtedness owing by Client to Factor, including any
indebtedness with respect to unpaid Client Risk Accounts Receivable, or the
ability of Client to pay or perform its obligations under this Agreement or any
other agreement with Factor, becomes doubtful or insecure, or additional
reserves are necessary to protect Factor against returns, claims or defenses of
Client's customers with respect to Factor Risk Accounts Receivables or any other
contingencies. All advances and other Obligations (as defined below) owing to
Factor, including any debit balance in the Reserve Account and any amounts owing
by Client to Factor for merchandise purchased from any other concern factored or
financed by Factor or otherwise, are repayable by Client on demand and may be
charged to the Reserve Account when due.
6. Warranties and Representations. Client warrants and represents that
each Account Receivable sold and assigned to Factor hereunder: (a) shall be
genuine and valid and shall represent a completed delivery or performance in
fulfillment in every respect of the terms, conditions and specifications of a
bona fide, uncancelled and unexpired sale or service in the ordinary course of
business to a customer which is not affiliated with Client in full compliance
with the specifications of such customer; (b) Client shall be at the time of
delivery or performance the absolute owner of all merchandise and other property
involved; (c ) except for Factor's interest therein, there are no security
interests, liens or encumbrances thereon; (d) is enforceable for the full amount
thereof and will be subject to no dispute or claim by the customer in whole or
in part as to price, terms, quality, quantity, delay in shipment, offsets,
counterclaims, contra accounts or any other defense of any other kind and
character, real or claimed; (e) will be subject to no discounts, deductions,
allowances, offsets, counterclaims or other contra items or to no special terms
of payment which are not shown on the face of the invoice thereof; (f) will not
represent a delivery of merchandise upon "consignment," "guaranteed sale," "sale
or return," "payment on reorder" or similar terms; (g) is payable in United
States Dollars and has been invoiced to the customer by an invoice that bears
notice of the sale and assignment to Factor in compliance with the terms of this
Agreement; and (h) will not represent a "pack, xxxx and hold" transaction unless
Client furnishes Factor with a copy of the customer's purchase order and has
obtained customer's agreement to grant Factor a security interest in the
merchandise and to pay for the merchandise at the maturity date of the invoice
irrespective of whether or not Client has received instructions to deliver the
same.
7. Collateral. As security for all obligations, liabilities and indebtedness of
Client to Factor, now existing or hereafter incurred, direct or indirect,
absolute or contingent, whether created under this Agreement, any supplement
hereto or any other agreement between Client and Factor or otherwise, including
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without limitation, obligations owed by Client to others which Factor obtains by
assignment (all of the foregoing being herein called the "Obligations"), Client
grants Factor a security interest in all of Client's present and future
accounts, contract rights, instruments, documents, chattel paper, general
intangibles, returned or repossessed goods arising out of or relating to the
sale or other disposition of goods at any time or from time to time, all books
and records relating thereto, all proceeds thereof and merchandise represented
thereby, and in all sums standing to the credit of Client and in any property of
Client in Factor's possession. Recourse to security shall not at any time be
required and Client shall at all times remain liable for the repayment upon
demand of all Obligations at any time owing by Client to Factor. During the term
of this Agreement, Client shall not sell or assign, negotiate, pledge or grant
any security interest in its Accounts Receivable, inventory and proceeds thereof
to anyone other than Factor, without Factor's prior written consent, except for
sales of inventory in the ordinary course of business.
8. Invoicing. All invoices for merchandise sold or services rendered shall
be prepared by Client and shall bear a notice that they have been assigned to,
are owned by and are payable directly and only to Factor. Upon Factor's request,
Client shall furnish Factor with copies of all invoices, accompanied by duly
executed assignment schedules, original shipping or delivery receipts, and such
other information or documents as Factor in its discretion may request from time
to time. If Client fails to provide Factor with copies of such invoices (or the
equivalent) or such proof of shipment or delivery when requested by Factor for
any Factor Risk Account Receivable, such Factor Risk Account Receivable shall
automatically become a Client Risk Account Receivable and Factor shall have no
liability with respect thereto. Each invoice shall bear the terms of sale and no
change from the original terms of sale shall be made without Factor's prior
written consent. Factor reserves the right to mail original invoices to Client's
customers at Client's expense; however, mailing, sending or delivery by Factor
of a xxxx or invoice shall not be deemed to be any representation by Factor with
respect thereto.
9. Payment of Accounts Receivable. All payments of Accounts Receivable and
other payments on behalf of Client received by Factor shall be credited to
Client's account on the day of receipt by Factor. No check, draft or other
instrument received by Factor shall constitute final payment unless and until
such check, draft or other instrument shall have been actually collected. The
amount of the Purchase Price of any Factor Risk Account Receivable which remains
unpaid will be deemed collected and will be credited to Client's account as of
the earlier of the following dates: (a) the date of the Account Receivable's
longest maturity if any proceeding or petition is instituted or filed by or
against the customer for relief under any federal or state bankruptcy or
insolvency law, code or act, or if a receiver or trustee is appointed for the
customer; or (b) as of the last day of the fourth month following its longest
maturity date if such Credit Risk Purchased Account remains unpaid as of such
date without the happening of any of the events specified in the preceding
clause (a). If any Factor Risk Account Receivable credited to Client's account
is not paid for any reason other than the customer's financial inability to pay,
Factor shall reverse the credit and charge Client's account accordingly and such
Account Receivable shall then be deemed a Client Risk Account Receivable, and
Client shall pay interest thereon as provided for herein.
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10. Remittances. Without limiting the obligations of Client under Section
8 hereof, all remittances received by Client with respect to all of its Accounts
Receivable purchased by Factor shall be held in trust for Factor, and Client
shall immediately deliver to Factor the identical checks, drafts, monies or
other forms of payment received, and Factor shall have the right to endorse
Client's name on any check, draft or other form of remittance received, where
such endorsement is required to effect collection. Client hereby appoints Factor
or such person as Factor may name as its attorney-in-fact to execute all
necessary documents in Client's name and do all things necessary to carry out
this Agreement. Client ratifies and approves all acts of the attorney and agrees
that neither Factor nor the attorney shall be liable for any acts of commission
or omission nor for any error of judgement or mistake of fact or law. This power
being coupled with an interest is irrevocable as long as Client is indebted to
Factor in any manner.
11. Customer Disputes and Claims. Client agrees to notify Factor
immediately of all returns and allowances and of all disputes with and claims
made by customers and to adjust all such claims and disputes at its own expense,
issuing credit memoranda promptly, but subject to Factor's approval. It is
Factor's practice to allow a reasonable time for the settlement of disputes
between Client and Client's customers without waiving Factor's right at any time
to adjust any claims and disputes on a Factor Risk Account Receivable directly
with the customer and to charge back to the Reserve Account at any time the full
amount of the Account Receivable involved. Factor may at any time charge the
Reserve Account the full amount of : (a) any customer deduction of not more than
one hundred dollars; (b) any Factor Risk Account which is not paid in full when
due for any reason other than the customer's financial inability to pay; (c) any
Account for which there is a breach of any of Client's warranties or
representations set forth herein; (d) any anticipation deducted by a customer on
any Account; and (e) any Client Risk Account Receivable which is not paid in
full when due. Any such charge back shall not be deemed to constitute a
reassignment of the Account Receivable, and Factor shall retain a security
interest therein as security for all Obligations owing to Factor.
12. Collection of Accounts; Returned Goods. As owner of the Accounts
Receivable, Factor shall have the right to (a) bring suit, or otherwise enforce
collection, of the Account Receivable in the name of Client or Factor, (b)
modify the terms of payment, settle, compromise or release, in whole or in part,
any amounts owing, on terms Factor may deem advisable, and (c) issue credits in
the name of Client or Factor. Should any goods be returned or rejected by
Client's customers or otherwise recovered by Client, Client shall segregate and
hold such goods in trust for Factor, but at Client's sole risk and expense.
Client shall also promptly notify Factor and, at Factor's request, will deliver
such goods to Factor, pay Factor the invoice price thereof, or sell such goods
at Client's expense for the purpose of paying Client's obligations to Factor.
Once Client has granted or issued a discount, credit or allowance to a customer
on any Account Receivable, Client shall have no further interest therein. Any
remittances received by Client on account of any of the Accounts Receivable
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shall be held by Client as trustee of an express trust for Factor's benefit,
separate from its own property, and Client shall immediately deliver the same in
kind properly endorsed to Factor. Factor may endorse Client's name on any check,
instrument, draft or other document in payment of an Account Receivable. Any
payments received from or for the account of a customer obligated on both Factor
Risk Accounts Receivable and Client Risk Accounts Receivable shall be applied
first to the Factor Risk Accounts Receivable irrespective of instructions of the
customer.
13. Commissions. Client agrees to pay Factor a commission equal to
forty-five one-hundredths percent (0.45%) of the gross amount of Accounts
Receivable assigned to Factor hereunder up to the aggregate sum of
$50,000,000.00 and thereafter, factoring commissions shall be reduced to four
tenths of one percent (.40%) on the aggregate amount of all Accounts Receivable
assigned to Factor in excess of the sum of $50,000,000.00 in any contract year.
In any event, however, shall the commission payable to Factor be less than $2.50
for each invoice. All commissions payable hereunder shall be charged to the
Reserve Account as of the date of receipt by Factor of the assignment schedules
of the Accounts Receivable. The foregoing commission is based upon Client's
maximum selling terms of no longer than sixty (60) days. On sales for which
extended or additional terms are granted, the commission shall be increased by
one-fourth of one percent (0.25%) for each thirty (30) days, or portion thereof,
by which Client's selling terms are extended. Client shall pay Factor an
administrative set up fee of $750.00 on November 30, 1998, which may be charged
to Client's Reserve Account.
14. Interest. Client shall pay interest upon the average daily Funds
Employed at the close of business each day at a rate equal to one-fourth of one
percent (0.25%) per annum over the Prime Rate. Funds Employed shall mean gross
Accounts Receivable outstanding on Factor's books less any balance outstanding
in the Reserve Account to the credit of Client. If the Reserve Account should
show a debit balance, such debit balance shall be added to gross Accounts
Receivable outstanding in determining Funds Employed. The Prime Rate shall be
defined as the interest rate announced from time to time by First Union National
Bank as its prime or base lending interest rate which may not necessarily be its
best lending 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 charged to the Reserve Account as of the last day of each month. If
average daily Funds Employed reflect a credit balance, Factor shall credit the
Reserve Account, as of the last day of the month, with interest on such average
daily credit balance at a rate equal to three percent below the Prime Rate. The
applicable Prime Rate for the month hereof shall be the Prime Rate in effect on
the last day of the month preceding the date of this Agreement and the
applicable Prime Rate for each month thereafter shall the Prime Rate in effect
on the last day of the preceding calendar month. In computing interest payable
by Client under this Agreement and any supplement hereto, all customer checks
and other payments received by Factor shall be subject to bank clearance of two
business days from the date of deposit.
15. Financial Statements and Information; Inspections. Client shall
furnish Factor with annual financial statements audited by an independent
accountant acceptable to Factor and also furnish on a timely basis interim
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financial statements and other financial information upon Factor's request,
including, but not limited to, monthly internal financial statements, all
financial information furnished to the Securities Exchange Commission and
Client's regular projections of cash flow and income. Client shall permit any
representative of Factor to visit and inspect any of the properties of Client,
to examine all books of accounts, records, reports and other papers, to make
copies and extracts therefrom, and to discuss the affairs, finances and accounts
of Client with its officers, employees, independent public accountants,
creditors and depository institutions all at such reasonable times and as often
as may be reasonably requested.
16. Financial Condition. Client warrants that it is solvent and shall
remain solvent during the term of this Agreement; that any financial statements
delivered to Factor accurately and fairly state Client's financial condition;
that there has been no material adverse change in Client's financial condition
as reflected in the statements since the date thereof nor do the statements fail
to disclose any fact or facts which might materially adversely affect Client's
financial condition; and there is no litigation pending or threatened, which
taken in the aggregate if adversely determined, can reasonably be expected to
have a material adverse affect on Client's financial condition.
17. Term of Agreement; Termination. This Agreement shall take effect on
the date of acceptance by Factor and shall remain in full force and effect until
terminated: (a) by Factor or Client as of its Anniversary Date or at any time
thereafter upon the giving of not less than sixty (60) days prior written notice
of termination to Factor or (b) by Factor at any time and without notice (unless
otherwise specifically provided for) if any of the following events (each, an
"Event of Default") shall occur: (i) On five calendar days notice if Client
shall default in the payment of any of the Obligations on the due date thereof
(whether due at stated maturity, on demand, upon acceleration or otherwise);
(ii) any representation or warranty made in this Agreement or any supplement
hereto, or in any other document executed in connection herewith, or any
instrument, certification or financial statement furnished in compliance with or
in reference hereto or thereto, or in any other agreement between Client and
Factor, shall prove incorrect or misleading in any material respect when made or
furnished; (iii) On 30 days notice if Client shall fail or neglect to perform,
keep or observe any covenant or agreement contained in this Agreement or any
supplement hereto or any other agreement between Client and Factor; (iv) Client
or any guarantor of the Obligations shall file a petition, answer or consent
seeking relief under Title 11 of the United States Bankruptcy Code, as now
constituted or hereafter amended, or any other applicable Federal or state
bankruptcy law or other similar law, or a receiver, liquidator, assignee,
trustee, custodian, sequestrator or similar official shall be appointed for
Client or any guarantor of the Obligations or any substantial part of its or his
property, or on 30 days notice if Client or any guarantor shall have filed
against it any such petition seeking relief under the Bankruptcy Code; (v) the
occurrence of any event or condition which, alone or when taken together with
all other events or conditions occurring or existing concurrently therewith,
Factor determines (1) has or may be reasonably expected to have a material
adverse effect upon Client's business, operations, properties, condition
(financial or otherwise); (2) has or may be reasonably expected to have any
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material adverse effect whatsoever upon the validity or enforceability of this
Agreement or any other agreement between Client and Factor; (3) has or may be
reasonably expected to have any material adverse effect upon any security for
the Obligations, Factor's liens therein or the priority of such liens; or (4)
materially impairs the ability of Client to perform its obligations under this
Agreement or any other agreement between Client and Factor, or the ability of
Factor to enforce and collect the Obligations or realize upon any of the
security for the Obligations in accordance with the terms of this Agreement or
any other agreement between Client and Factor or applicable law; (vi) Client
becomes unable to meet its debts as they mature, fails, closes, suspends, or
goes out of business; or (vii) there is a change (by death or otherwise) in
Client's principal stockholders or owners. "Anniversary Date" means the last day
of the twelfth (12th) month following the date of this Agreement.
18. Effect of Termination. Upon the effective date of termination, all
Obligations of Client to Factor shall become immediately due and payable without
further notice or demand irrespective of any maturity dates established prior
thereto. However, no such termination shall release or abrogate any security
interest held by Factor in any collateral of Client until all of Client's
Obligations to Factor, including commissions and interest and all costs,
expenses and attorney fees as herein provided, are paid in full. In the event
that Factor shall cease to act as factor for Client, Client agrees to furnish
Factor with indemnity satisfactory to Factor that will protect Factor against
possible charges to Client under the terms of this Agreement and with a release
satisfactory to Factor of all claims Client may have against Factor and until
Client does so, Factor may hold any balance remaining to Client's credit in the
Reserve Account as security for all Obligations of Client to Factor. Client
shall pay Factor upon demand all costs and expenses, including reasonable
attorney fees, incurred by Factor to obtain or enforce payment of any
Obligations due from Client to Factor or in the prosecution or successful
defense of any action or proceeding concerning any matter arising out of or
related to this Agreement, the factoring of the Client's Accounts Receivable by
Factor, or any Obligations owing by Client to Factor.
19. Lien Perfection. 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
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. This power being coupled with an
interest is irrevocable as long as Client is indebted to Factor in any manner.
Client shall execute, acknowledge and/or deliver such other instruments as
assurances as may reasonably be requested to effectuate the purposes of this
Agreement. At Factor's option, this Agreement may be filed as a financing
statement.
20. Preferences. Client shall indemnify and hold Factor harmless from any
loss, damage or expense (including attorneys' fees) incurred by Factor as a
result of a claim made at any time against Factor for the repayment or recovery
of any amount received by Factor in payment of any Client Risk Account
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Receivable by the payor or legal representative thereof (including a trustee in
bankruptcy or assignee for the benefit of creditors) on the grounds of
preference under the provisions of the Bankruptcy Code or any other federal or
state insolvency law. If such claim is ever made against Factor, in addition to
all of Factor's other rights under this Agreement, Client shall pay to Factor on
demand the full net face amount of any such Client Risk Account Receivable, or
if Factor so elects, Factor shall have the right to charge against the Reserve
Account the full net face amount of any such Client Risk Account Receivable, but
such charge back shall not be deemed a reassignment thereof. The provisions of
this Section 17 shall survive the termination of this Agreement and the payment
in full of the Obligations.
21. Notices. Any notices, demands, consents, or other writings or
communications permitted or required by this Agreement shall be given by
facsimile transmitter, overnight air courier or certified mail, return receipt
requested, addressed to the party to be notified as follows:
(a) If to Factor: GE Capital First Factors
Corporation
000 Xxxxx Xxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No.
----------------
(b) If to Client: Jalate, Ltd.
0000 Xxxxxxxx Xxxxxx
Xxxx xx Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile No. 000-000-0000
or to such other address as each party may designate for itself by notice given
in accordance with this Section 21. Any written notice or demand that is not
sent in conformity with the provisions hereof shall nevertheless be effective on
the date that such notice is actually received by the noticed party.
22. Miscellaneous. This Agreement, together with any supplement hereto,
contains the entire agreement between the parties, and cannot be modified,
altered, changed or amended orally. This Agreement is intended solely for the
benefit of Factor and Client, and no other person or party (including any
guarantor), is intended to be benefited hereby in any way. The captions in this
Agreement are for convenience of reference only and shall not define or limit
any of the terms or provisions hereof. Failure of Factor to exercise any rights
granted to it hereunder upon any breach or default by Client shall not be deemed
a waiver thereof in the event of further breaches or defaults. The remedies of
Factor hereunder shall be deemed to be cumulative and not exclusive. This
Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their respective successors and assigns and shall become effective only from
the date of Factor's written acceptance. This Agreement is made and accepted and
shall be construed, interpreted and enforced in accordance with the laws of the
State of California, without regard to conflict of law principles, and Client
irrevocably consents and submits to the jurisdiction of state courts of, and
federal courts in, the state of California, for the purpose of any suit, action
or proceeding relating hereto.
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23. 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
THIS AGREEMENT OR ANY SUPPLEMENT HERETO 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.
24. Special Covenants. For so long as any of the Obligations are
outstanding, Client covenants that, unless otherwise consented to by Factor in
writing, it shall comply with the covenants set forth in Schedule A attached
hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the day and year first above written.
JALATE, LTD.
By: /s/ Xxxx Xxxxxxxxxxx
-------------------------------------------
Title: Vice President Finance and
Chief Financial Officer
--------------------------------------
Accepted in Los Angeles, California:
GE CAPITAL FIRST FACTORS CORPORATION
By: /s/ Xxxx Xxxx
---------------------------------
Title: Senior Vice President
---------------------------
Date: November 10, 1998
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SCHEDULE A
TO
FACTORING AGREEMENT
Special Covenants of Client
----------------------------
For the purposes of this Schedule A to the Factoring Agreement, the
following terms shall have the following meanings:
Affiliate as to of its Subsidiaries, any other person (other than a
Subsidiary): (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, Client or any of
its Subsidiaries; (ii) which beneficially owns or holds 5% or more of any class
of the stock of Client or any of its Subsidiaries; or (iii) 5% or more of the
stock (or in the case of a person which is not a corporation, 5% or more of the
equity interest) of which is beneficially owned or held by Client or any of its
Subsidiaries.
"Consolidated" the consolidation in accordance with GAAP of the accounts
or other items as to which such term applies.
"Consolidated Adjusted Tangible Assets" all assets of Client and its
Subsidiaries which would in accordance with GAAP be classified as assets on
their Consolidated balance sheet except: (i) any surplus resulting from any
write up of assets subsequent to the date of the Agreement; (ii) deferred
assets, other than prepaid insurance and prepaid taxes; (iii) patents,
copyrights, trademarks, trade names, non compete agreements, franchises and
other similar intangibles; (iv) goodwill, including any amounts, however
designated on such Consolidated balance sheet, representing the excess of the
purchase price paid for assets or stock over the value assigned thereto on the
books of Client and its Subsidiaries; (v) unamortized debt discount and expense;
and (vi) Accounts Receivable, notes and other receivables due from Affiliates,
officers or employees.
"Consolidated Adjusted Tangible Net Worth" at any date means a sum
equal to:
(i) the net book value (after deducting related depreciation,
obsolescence, amortization, valuation, and other proper reserves) at which the
Consolidated Adjusted Tangible Assets of Client and its Subsidiaries would be
shown on a Consolidated balance sheet at such date in accordance with GAAP,
minus
(ii) the amount at which the liabilities of Client and its
Subsidiaries (other than capital stock and surplus) would be shown on such
Consolidated balance sheet in accordance with GAAP.
"Consolidated Current Assets" at any date means the amount at which all of
the current assets of Client and its Subsidiaries would be properly classified
as Consolidated current assets shown on a Consolidated balance sheet at such
date in accordance with GAAP except that amounts due from Affiliates and
investments in Affiliates shall be excluded therefrom.
"Consolidated Current Liabilities" at any date means the amount at which
all of the Consolidated current liabilities of Client and its Subsidiaries would
be properly classified as Consolidated current liabilities on a Consolidated
balance sheet at such date in accordance with GAAP.
12
"Consolidated Working Capital" at any date the excess of Consolidated
Current Assets at such date over Consolidated Current Liabilities at such date.
"GAAP" generally accepted accounting principles in the United States of
America in effect from time to time.
"Subsidiary" any corporation of which Client owns, directly or indirectly
through one or more intermediaries, more than fifty percent (50%) of the stock
at the time of determination.
For so long as the Agreement is in effect, and thereafter for so long as
there are any Obligations to Factor, Client covenants that, unless otherwise
consented to by Factor in writing, it shall comply with the following financial
covenants:
(a) Consolidated Adjusted Tangible Net Worth. Client and its Subsidiaries
shall maintain at all times a Consolidated Adjusted Tangible Net Worth of not
less than the amount shown below for the period corresponding thereto:
Consolidated Adjusted
Period Tangible Net Worth
------ ---------------------
SEE ATTACHED EXHIBIT
(b) Consolidated Working Capital. Client and its Subsidiaries shall
achieve maintain at all times Consolidated Working Capital of not less than the
amount shown below for the period corresponding thereto:
Period Consolidated Working Capital
------ ----------------------------
SEE ATTACHED EXHIBIT
13
SCHEDULE A
EXHIBIT 1
Nov-98 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99
Tangible Net Worth:
Projected $ 1,204 $ 1,070 $ 1,062 $ 1,221 $ 1,748 $1,942
Covenant 750 750 850 1,000 1,500 1,500
Working Capital:
Projected $ (999) $ (1,195) $ (1,178) $ (942) $ (438) $ (118)
Covenant (1,250) (1,500) (1,500) (1,500) (1,000) (750)
May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99
Tangible Net Worth:
Projected $ 2,242 $ 2,606 $ 2,819 $ 2,938 $ 2,994 $ 3,456
Covenant 1,750 1,750 2,000 2,000 2,000 2,500
Working Capital:
Projected $ 142 $ 649 $ 847 $ 1,083 $ 1,163 $ 1,704
Covenant (500) 0 250 500 500 1,000
Nov-99 Dec-99
Tangible Net Worth:
Projected $ 3,319 $ 3,109
Covenant 2,500 2,500
Working Capital:
Projected $ 1,596 $ 1,416
Covenant 1,000 1,000
