H.C.C. FINANCIAL SERVICES
00 Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
FACTORING AGREEMENT
This Factoring Agreement (the "Agreement") is made on the 31st day of March,
1992 by and between H.C.C. Financial (Buyer) services doing business at 00
Xxxxxxx Xxxxx, Xxxxxxxx, XX 00000 and Cross/Z International, Inc., a California
corporation (Seller) having its principal place of business and chief
executive office at:
Address: 0000 XXXXXXX XXXX., XXXXX 000
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City: ALAMEDA
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County: ALAMEDA
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State: CALIFORNIA, 94501
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Mailing address (if different from above)
Post Office Box: ___________________________________________
City: ___________________________________________
State: ___________________________________________
Zip Code: ___________________________________________
Definitions. When used herein, the following terms shall have
the following meanings.
1.1 "Account Balance" shall mean, on any given day, the gross amount of all
Purchased Receivables unpaid on that day.
1.2 "Account Debtor" shall have the meaning set forth in the California
Uniform Commercial Code and shall include any person liable on any
Purchased Receivable, including without limitation, any guarantor of
the Purchased Receivable and any issuer of a letter of credit or
banker's acceptance.
1.3 "Adjustments" shall mean all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of
return, warranty claims, or short payments, asserted by or on behalf of
any Account Debtor with respect to any Purchased Receivable.
1.4 "Administrative Fee" shall have the meaning as set forth in Section 3.3
hereof.
1.5 "Advance" shall have the meaning set forth in Section 2.2 hereof.
1.6 "Collateral" shall have the meaning set forth in Section 8 hereof.
1.7 "Collections" shall mean all good funds received by Buyer from or on
behalf of an Account Debtor with respect to Purchased Receivables.
1.8 "Event of Default" shall have the meaning set forth in Section 9
hereof.
1.9 "Finance Charges" shall have the meaning set forth in Section 3.2
hereof.
1.10 "Invoice Transmittal" shall mean a writing signed by an authorized
representative of Seller which accurately identifies the Purchased
Receivables, and includes for each Purchased Receivable the correct
amount owed by the Account Debtor, the name and address of the Account
Debtor, the invoice number, the invoice date and the account code.
1.11 "Obligations" shall have the meaning set forth in Section 4.4 hereof.
1.12 "Purchased Receivables" shall mean all those accounts, chattel paper,
instruments, contract rights, documents, general intangibles, letters
of credit, drafts, bankers acceptances, and rights to payment, and all
proceeds thereof, arising out of the invoices and other agreements
identified on or delivered with any Invoice Transmittal delivered by
Seller to Buyer which Buyer elects to purchase and for which Buyer
makes an Advance.
1.13 "Refund" shall have the meaning set in Section 3.5 hereof.
1.14 "Reserve" shall have the meaning set forth in Section 2.4 hereof.
1.15 "Repurchase Amount" shall have the meaning set forth in Section 4.2
hereof.
1.16 "Reconciliation Date" shall mean the last calendar day of each
Reconciliation Period.
1.17 "Reconciliation Period" shall mean each calendar month of every year.
2. PURCHASE AND SALE OF RECEIVABLES.
2.1 OFFER TO SELL RECEIVABLES. During the term hereof, and
provided that there does not then exist any Event of Default or any event that
with notice, lapse of time or otherwise would constitute
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an Event of Default, Seller may request that Buyer purchase receivables and
Buyer may, in its sole discretion, elect to purchase receivables. Seller shall
deliver to Buyer an Invoice Transmittal with respect to any receivable for which
a request for purchase is made. An authorized representative of Seller shall
sign each Invoice Transmittal delivered to Buyer. Buyer shall be entitled to
rely on all of the information provided by Seller to Buyer on the Invoice
Transmittal and to rely on the signature on any Invoice Transmittal as an
authorized signature of Seller.
2.2 ACCEPTANCE OF RECEIVABLES. Buyer shall have no obligation to
purchase any receivable listed on an Invoice Transmittal. Buyer may exercise its
sole discretion in approving the credit of each Account Debtor before buying any
receivable. Upon acceptance by Buyer of all or any of the receivables described
on any Invoice Transmittal, Buyer shall pay to Seller 80 percent of the face
amount of each receivable Buyer desires to purchase. Such payment shall be the
"Advance" with respect to such receivable. Buyer may, from time to time, in its
sole discretion, change the percentage of the Advance. Upon Buyer's acceptance
of the receivable and payment to Seller of the Advance, the receivable shall
become a "Purchased Receivable."
2.3 EFFECTIVENESS OF SALE TO BUYER. Effective upon Buyer's payment
of an Advance, and for and in consideration therefor and in consideration of the
covenants of this Agreement, Seller hereby absolutely sells, transfers and
assigns to Buyer, all of Seller's right, title and interest in and to each
Purchased Receivable and all monies due or which may become due on or with
respect to such Purchased Receivable. Buyer shall be the absolute owner of each
Purchased Receivable. Buyer shall have, with respect to any goods related to the
Purchased Receivable, all the rights and remedies of an unpaid seller under the
Uniform Commercial Code and other applicable law, including the rights of
replevin, claim and delivery, reclamation and stoppage in transit.
2.4 ESTABLISHMENT OF A RESERVE. Upon the purchase by Buyer of each
Purchased Receivable, Buyer shall establish a reserve. The reserve shall be the
amount by which the face amount of the Purchased Receivable exceeds the Advance
on that Purchased Receivable (the "Reserve"); provided, the Reserve with respect
to all Purchased Receivables outstanding at any one time shall be the amount not
less than 20 percent of the Account Balance at that time and may be set at a
higher percentage, at Buyer's sole discretion. The Reserve shall be a book
balance maintained on the records of Buyer and shall not be a segregated fund.
3. COLLECTIONS, CHARGES AND REMITTANCES.
3.1 COLLECTIONS. Upon receipt by Buyer of Collections,
Buyer shall promptly credit such Collections to Seller's Account
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Balance on a daily basis; provided, that if Seller is in default under this
Agreement, Buyer shall apply all Collections to Seller's Obligations hereunder
in such order and manner as Buyer may determine. If an item of collection is not
honored or Buyer does not receive good funds for any reason, the amount shall be
included in the Account Balance as if the Collections had not been received and
Finance Charges under Section 3.2 shall accrue thereon.
3.2 FINANCE CHARGES. On each Reconciliation Date, Seller shall pay
to Buyer a finance charge in an amount equal to one percent per month of the
average daily Account Balance outstanding during the applicable Reconciliation
Period (the "Finance Charges"). Buyer shall deduct the accrued Finance Charges
from the Reserve as set forth in Section 3.5 below.
3.3 ADMINISTRATIVE FEE. On each Reconciliation Date Seller shall
pay to Buyer an Administrative Fee equal to zero percent of the face amount of
each Purchased Receivable first purchased during that Reconciliation Period (the
"Administrative Fee"). Buyer shall deduct the Administrative Fee from the
Reserve as set forth in Section 3.5 below.
3.4 ACCOUNTING. Buyer shall prepare and send to Seller after the
close of business for each Reconciliation Period, an accounting of the
transactions for that Reconciliation Period, including the amount of all
Purchased Receivables, all Collections, Adjustments, Finance Charges, and the
Administrative Fee. The accounting shall be deemed correct and conclusive unless
Seller makes written objection to Buyer within thirty (30) days after the date
Seller mails the accounting to Buyer.
3.5 REFUND TO SELLER. Provided that there does not then exist an
Event of Default or any event or condition that with notice, lapse of time or
otherwise would constitute an Event of Default, Buyer shall refund to Seller by
check after the Reconciliation Date, the amount, if any, which Buyer owes to
Seller at the end of the Reconciliation Period according to the accounting
prepared by Buyer for that Reconciliation Period (the "Refund"). The Refund
shall be an amount equal to:
(A) (1) The Reserve as of the beginning of the
Reconciliation Period, plus
(2) the Reserve created for each Purchased
Receivable purchased during that
Reconciliation Period, minus
(B) The total for that Reconciliation Period of:
(1) the Administrative Fee;
(2) Finance Charges;
(3) Adjustments;
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(4) Repurchase Amounts, to the extent Buyer has
agreed to accept payment thereof by deduction
from the Refund; and
(5) the Reserve for the Account Balance as of the
first day of the following Reconciliation
Period in the minimum percentage set forth in
Section 2.4 hereof.
In the event the formula set forth in this Section 3.5 results in an amount due
to Buyer from Seller, Seller shall make such payment in the same manner as set
forth in Section 4.3 hereof for repurchases. If the formula set forth in this
Section 3.5 results in an amount due to Seller from Buyer, Seller shall make
such payment by check, subject to Buyer's rights under Section 4.3 and Buyer's
rights of offset and recoupment.
4. RECOURSE AND REPURCHASE OBLIGATIONS.
4.1 RECOURSE. Buyer's acquisition of Purchased Receivables from
Seller shall be with full recourse against Seller. In the event the Obligations
exceed the amount of Purchased Receivables and Collateral, Seller shall be
liable for any deficiency.
4.2 SELLER'S AGREEMENT TO REPURCHASE. Seller agrees to pay
to Buyer on demand, the full face amount, or any unpaid portion
of, any Purchased Receivable:
(A) which remains unpaid ninety (90) calendar days after
the invoice date; or
(B) which is owed by any Account Debtor who has filed, or
has had filed against it, any bankruptcy case, assignment for
the benefit of creditors, receivership, or insolvency
proceeding or who has become insolvent (as defined in the
United States Bankruptcy Code) or who is generally not paying
its debts as such debts become due; or
(C) with respect to which there has been any breach of
warranty or representation set forth in Section 6 hereof or
any breach of any covenant contained in this Agreement; or
(D) with respect to which the Account Debtor asserts any
discount, allowance, return, dispute, counterclaim, offset,
defense, right of recoupment, right of return, warranty claim,
or short payment;
4.3 SELLER'S PAYMENT OF THE REPURCHASE AMOUNT. When any Repurchase
Amount becomes due, Buyer shall inform Seller of the manner of payment which may
be any one or more of the following in Buyer's sole discretion: (a) in cash
immediately upon demand therefor; (b) by delivery of substitute invoices and an
Invoice Transmittal acceptable to Buyer which shall thereupon become
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Purchased Receivables; (c) by adjustment to the Reserve pursuant to Section 3.5
hereof; (d) by deduction from or offset against the Refund that would otherwise
be due and payable to Seller; or (e) by any combination of the forgoing as Buyer
may from time to time choose.
4.4 SELLER'S AGREEMENT TO REPURCHASE - ALL PURCHASED RECEIVABLES.
Upon and after the occurrence of an Event of Default, Seller shall, upon Buyer's
demand, repurchase the Purchased Receivables then outstanding such option
thereof as Buyer may demand. Such demand may, at Buyer's option, include and
Seller shall pay to Buyer immediately upon demand, cash in an amount equal to
the Advance with respect to each Purchased Receivable then outstanding together
with all accrued Finance Charges, Adjustments, Administrative Fees, attorneys'
and professional fees, court costs and expenses as provided for herein, and any
other amounts due and owing hereunder (the "Obligations"). Upon receipt of
payment in full of the Obligations, Buyer shall immediately instruct Account
Debtors to pay Seller directly, and return to Seller any Refund due to Seller.
For the purpose of calculating any Refund due under this Section only, the
Reconciliation Date shall be deemed to be the date Buyer receives payment in
good funds of all the Obligations as provided in this Section 4.4.
5. POWER OF ATTORNEY. Seller does hereby irrevocably appoint Buyer and its
successors and assigns as Seller's true and lawful attorney in fact, with
respect to Purchased Receivables and hereby authorizes Buyer, regardless of
whether there has been an Event of Default (a) to sell, assign, transfer,
pledge, compromise, or discharge the whole or any part of the Purchased
Receivables; (b) to demand collect, receive, xxx, and give releases to any
Account Debtor for the monies due or which may become due upon or with respect
to the Purchased Receivables and to compromise, prosecute, or defend any action,
claim, case, or proceeding relating to the Purchased Receivables, including the
filing of a claim or the voting of such claims in any bankruptcy case, all in
Buyer's name or Seller's name, as Buyer may choose; (c) to prepare, file and
sign Seller's name on any notice, claim, assignment, demand, draft or notice of
or satisfaction of lien or mechanics' lien or similar document; (d) to notify
all Account Debtors with respect to the Purchased Receivables to pay Buyer
directly; (e) to receive, open, and dispose of all mail addressed to Seller for
the purpose of collecting the Purchased Receivables; (f) to endorse Seller's
name on any checks or other forms of payment on the Purchased Receivables; and
(g) to do all acts and things necessary or expedient, in furtherance of any such
purposes. If Buyer receives a check or item which is payment for both a
Purchased Receivable and another receivable, the funds shall first be applied to
the Purchased Receivable and, so long as there does not exist an Event of
Default, the excess shall be remitted to Seller.
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6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1 RECEIVABLES' WARRANTIES, REPRESENTATIONS AND COVENANTS. To induce
Buyer to buy receivables and to render its services to Seller, and with full
knowledge that the truth and accuracy of the following are being relied upon by
the Buyer in determining whether to accept receivables as Purchased Receivables,
Seller represents, warrants, covenants and agrees, with respect to each Invoice
Transmittal delivered to Buyer and each Receivable described therein, that;
(A) Seller is the absolute owner of each receivable set
forth in the Invoice Transmittal and has full legal right to
sell, transfer and assign such receivables;
(B) The correct amount of each receivable is as set forth
in the Invoice Transmittal and is not in dispute;
(C) The payment of each receivable is not contingent upon
the fulfillment of any obligation or contract, past or future,
and any and all obligations required of the Seller have been
fulfilled as of the date of this Agreement;
(D) Each receivable set forth on the Invoice Transmittal
is based on an actual sale and delivery of goods and/or
services actually rendered, is presently due and owing to
Seller, is not past due or in default, has not been previously
sold, assigned, transferred, or pledged and is free of any
encumbrance of lien;
(E) There are no defenses, offsets, or counterclaims
against any of the receivables, and no agreement has been made
under which the Account Debtor may claim any deduction or
discount, except as otherwise stated in the Invoice
Transmittal;
(F) Each Purchased Receivable shall be the property of
the Buyer and shall be collected directly by Buyer, but if for
any reason it should be paid to Seller, Seller shall promptly
notify Buyer of such payment, shall hold any checks, drafts,
or monies so received in trust for the benefit of Buyer, and
shall promptly, transfer and deliver the same to the Buyer;
(G) Buyer shall have the right of endorsement, and also
the right to require endorsement by Seller, on all payments
received in connection with each Purchased Receivable and any
proceeds of Collateral;
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(H) Seller, and to Seller's best knowledge, each Account
Debtor set forth in the Invoice Transmittal, are and shall
remain solvent as that term is defined in the federal
Bankruptcy Code and the Uniform Commercial Code;
(I) Each Account Debtor named on the Invoice Transmittal
will not object to the payment for, or the quality or the
quantity of the subject matter of, the receivable and is
liable for the amount set forth on the Invoice Transmittal;
(J) Each Account Debtor shall promptly be notified after
acceptance by Buyer that the Purchased Receivable has been
transferred to and is payable to Buyer, and Seller shall not
take or permit any action countermand such notification; and
(K) All receivables forwarded to and accepted by Buyer
after the date hereof, and thereby becoming Purchased
Receivables, shall comply with each and every one of the
foregoing representations, warranties, covenants and
agreements referred to above in this Section 6.1.
6.2 ADDITIONAL WARRANTIES, REPRESENTATIONS AND COVENANTS. In addition
to the foregoing warranties, representations and covenants, to induce Buyer to
buy receivables and to render its services to Seller, Seller hereby represents,
warrants, covenants and agrees that:
(A) Seller will not assign, transfer, sell, or grant any
lien or security interest in any Purchased Receivables or
Collateral to any other party, without Buyer's prior written
consent;
(B) The Seller's name, form of organization, place of
business and the place where the records concerning all
receivables herein referred to are kept as set forth at the
beginning of this Agreement, and Seller will promptly advise
Buyer in writing if such name, organization, place of business
or record keeping is changed or a new place of business or
record keeping is added and shall execute any documents
necessary to perfect Buyer's interest in the Purchased
Receivables and the Collateral; and
(C) Seller shall pay all of its normal gross payroll for
employees, and all federal and state taxes, as and
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when due, including without limitation all payroll and
withholding taxes and state sales taxes.
7. ADJUSTMENTS. In the event of a breach of any of the representations,
warranties, or covenants set forth in Section 6.1, or in the event any
Adjustment or dispute is asserted by any Account Debtor, Seller shall promptly
advise Buyer and shall, subject to the Buyer's approval, resolve such disputes
and advise Buyer of any adjustment. Unless the disputed Purchased Receivable is
repurchased by Seller and the full Repurchase Amount is paid, Buyer shall remain
the absolute owner of any Purchased Receivable which is subject to Adjustment or
repurchase under Section 4.2 hereof, and any rejected, returned, or recovered
personal property, with the right to take possession thereof at any time. If
such possession is not taken by Buyer, Seller is to resell it for Buyer's
account Seller's expense with the proceeds made payable to Buyer. While Seller
retains possession of said returned goods, Seller shall segregate said goods and
xxxx them "property of Silicon Valley Financial Services."
8. SECURITY INTEREST. In order to secure all of Seller's now existing
or hereafter arising obligations to Buyer under this Agreement and the
professional and legal fees and expenses set forth herein. Seller hereby grants
the Buyer a continuing lien upon and security interest in all Seller's now
existing or hereafter arising rights and interests in the following (the
"Collateral"):
(A) All accounts, contract rights, chattel paper, general
intangibles, claims, causes of action, instruments, documents, letters
of credit, bankers acceptances, drafts, rights in and under insurance
policies, rights to tax refunds, and inventory, and all proceeds of any
of the foregoing, including Seller's rights to any returned or rejected
goods, with respect to which Buyer shall have all the rights of any
unpaid seller, including the rights of replevin, claim and delivery,
reclamation, and stoppage in transit;
(B) All Seller's rights to monies, refunds, and other amounts due
hereunder, which security interest shall include Seller's right of
offset and recoupment;
(C) All goods of Seller, including, but not limited to, all goods,
equipment, farm products, machinery, furniture, furnishings, fixtures,
tools, supplies and motor vehicles; and
(D) All proceeds of the foregoing, whether due to voluntary or
involuntary disposition, including insurance proceeds.
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Seller is not authorized to sell, assign, transfer or otherwise convey any
Collateral without Buyer's prior consent, except for the sale of finished
inventory in the Seller's usual course of business. Seller agrees to sign UCC
financing statements, in a form acceptable to Buyer. Seller agrees to deliver to
Buyer the originals of all instruments, chattel; paper and documents evidencing
or related to Purchased Receivables.
9. DEFAULT. The occurrence of any one or more of the following shall
constitute and Event of Default hereunder.
(A) Seller fails to pay any amount owed to Buyer as and when due;
(B) There shall be commenced by or against Seller any voluntary or
involuntary case under the federal Bankruptcy Code, or any assignment
for the benefit of creditors, or appointment of a receiver or custodian
for any of its assets;
(C) Seller shall become insolvent in that its debts are greater
than the fair value of its assets, or Seller is generally not paying it
debts as they become due or is left with unreasonably small capital;
(D) Any involuntary lien, garnishment, attachment or the like is
issued against or attaches to the Purchased Receivables or the
Collateral and the same is not released within ten (10) days after the
date it is issued or attaches; or
(E) Seller shall breach any covenant, agreement, warranty, or
representation set forth herein, and the same is not cured to Buyer's
satisfaction within ten (10) days after Buyer has given Seller oral or
written notice thereof; provided, that if such breach is incapable of
being cured it shall constitute an immediate default hereunder.
10. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default, (1)
without implying any obligation to buy receivables, Buyer may cease buying
receivables or extending any financial accommodations to Seller; and (2) Buyer
shall have and may exercise all the rights and remedies under this Agreement and
under applicable law, including the rights and remedies of a secured party under
the California Commercial Code, including all the power of attorney rights
described in Section 5 with respect to any Collateral and the right to collect,
dispose of, sell, lease, use, and realize upon all Purchased Receivables and all
Collateral in any commercially reasonable manner. Seller and Buyer agree that
any notice of sale required to be given to Seller shall be deemed to be
reasonable if given five (5) days prior to the date on or after which the sale
may be held.
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11. ACCRUAL OF INTEREST. If any amount owed by Seller hereunder is not paid
when due, including, without limitation, amounts due under Section 3.5,
Repurchase Amounts, Obligations, and professional fees and expenses under
Section 11, such amounts shall bear interest at a per annum rate equal to the
per annum rate of the Finance Charges until the earlier of (i) payment in good
funds or (ii) entry of a final judgment therefor, at which time the principal
amount of any money judgment remaining unsatisfied shall accrue interest at the
highest rate allowed by applicable law.
12. ATTORNEY'S FEES. The Seller will pay to Buyer immediately upon demand
all reasonable fees and expenses of attorneys and other professionals that Buyer
incurs in preparing, negotiating and enforcing this Agreement, protecting or
enforcing its interest in the Purchased Receivables or the Collateral,
collecting Purchased Receivables, and representing Buyer in connection with any
bankruptcy case or insolvency proceeding involving Seller, the Collateral, any
Account Debtor, or any Purchased Receivables.
13. SEVERABILITY AND CHOICE OF LAW. In the event that any provision of this
Agreement is deemed invalid by reason of law, this Agreement will be construed
as not containing such provision and the remainder of the Agreement shall remain
in full force and effect. This Agreement has been transmitted by Seller to Buyer
at Buyer's office in the State of California and has been executed and accepted
by Buyer in the State of California. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California.
14. ACCOUNT COLLECTION SERVICES. Certain Account Debtors may require or
prefer that all of Seller's receivables be paid to the same address and/or
party, or Seller and Buyer may agree that all receivables with respect to
certain Account Debtors be paid to one party. In such event Buyer and Seller may
agree that Buyer shall collect all receivables whether owned by Seller or Buyer
and (provided that there does not then exist an Event of Default or event that
with notice, lapse or time otherwise would constitute an Event of Default, and
subject to Buyer's rights in the Collateral) Buyer agrees to remit to Seller the
amount of the receivables collections it receives with respect to receivables
other than Purchased Receivables. It is understood and agreed by Seller that
this Section does not impose any affirmative duty on Buyer to do any act other
than to turn over such amounts. All such receivables and collections are
Collateral and in the event of Seller's default hereunder, Buyer shall have no
duty to remit collections of Collateral and may apply such collections to the
obligations hereunder and Buyer shall have all the rights of a secured party
under the Uniform Commercial Code.
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15. NOTICES. All notices shall be given to Buyer and Seller at the
addresses set forth on the first page of this Agreement and shall be deemed to
have been delivered and received: (a) if service; or (c) on the same date of
transmission if sent by hand delivery, telecopy, telefax or telex.
16. TERM AND TERMINATION. The term of this Agreement shall be for one (1)
year from the date hereof, and from year to year thereafter unless terminated in
writing by Buyer or Seller. Seller and Buyer shall each have the right to
terminate this Agreement at any time. Notwithstanding the foregoing, any
termination of this Agreement shall not affect Seller's security interest in the
Collateral and Buyer's ownership of the Purchased Receivables, and this
Agreement shall continue to be effective, and Buyer's rights and remedies
hereunder shall survive such termination, until all transactions entered into
and Obligations incurred hereunder have been completed and satisfied in full.
17. TITLES AND SECTION HEADINGS. The titles and section headings used
herein are for convenience only and shall not be used in interpreting this
agreement.
IN WITNESS WHEREOF, Seller and Buyer have executed this agreement on
the day and year above written.
SELLER Cross/Z International, Inc.
BY /s/ Xxxxx Xxxxxxx
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TITLE Senior Vice President
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BUYER H.C.C. Financial Services
BY /s/ Xxxxxxx X. Xxxxxx
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TITLE President
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ITEM IV, 1
EXHIBIT I
CROSS/Z INTERNATIONAL, INC.
ADDENDUM TO FACTORING AGREEMENT
This Addendum to Factoring Agreement (the "Addendum") is made
as of May 8, 1996 by and between CROSS/Z INTERNATIONAL, INC., a California
corporation (the "Company"), and H.C.C. Financial Services, a California
proprietorship doing business at 00 Xxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000
("HCC").
RECITALS
A. The Company and HCC have previously entered into that
certain Factoring Agreement dated as of March 31, 1992, relating to the
financing of the Company's accounts receivable (the "Factoring Agreement").
B. As of the date hereof, aggregate eligible receivables
were approximately $700,000.
C. As of the date hereof, the Company had borrowings in
the aggregate principal amount of approximately $1,127,000 under the Factoring
Agreement.
D. The Company is currently in default under the
Factoring Agreement and the Outstanding Balance is immediately due and payable
upon demand by HCC.
E. The Company has entered into a Series D Preferred
Stock Purchase Agreement dated as of even date herewith (the "Series D
Agreement") pursuant to which the Company intends to issue and sell to those
persons named on Exhibit A thereto (the "Purchasers") up to 5,649,533 shares of
its Series D Preferred Stock, $0.001 par value per share, at a purchase price of
$1.07 per share (the "Series D Financing"). The Series D Agreement and the
exhibits thereto contemplate the issuance of additional shares of Series D
Preferred Stock as a condition to the initial closing of the Series D Financing.
All capitalized terms not otherwise defined herein shall have the meanings set
forth in the Series D Agreement.
F. The Series D Agreement provides that the amendment of
the Factoring Agreement shall be a condition to the closing of the Series D
Financing.
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NOW, THEREFORE, THE PARTIES HERETO AGREE to amend the Factoring
Agreement as follows:
1. HCC agrees that it will not demand payment under the Factoring
Agreement until the earlier of (i) Xxxxx 00, 0000, (xx) a material breach by the
Company hereunder, or (iii) the occurrence of any of the events of default set
forth in Section 9(B), (C) or (D) of the Factoring Agreement (the "Standstill
Period").
2. During the term of the Standstill Period, the Company will set
aside segregated funds equal to the difference between then outstanding
borrowings under the Factoring Agreement and Eligible Receivables (the "Cash
Collateral Account"). The Cash Collateral Account shall be kept in an interest
bearing bank account. The Company shall grant HCC a security interest in the
Cash Collateral Account to secure its obligations under the Factoring Agreement.
3. Effective April 30, 1996 and during the term of the Standstill
Period, the Company will pay to HCC $10,000 on the first business day of each
month. Such amounts will be applied to reduce outstanding borrowings under the
Factoring Agreement and will be in addition to payment of monthly interest on
outstanding borrowings under the Factoring Agreement.
4. Effective immediately, the interest rate on all outstanding
borrowings under the Factoring Agreement shall be reduced to the greater of (i)
12% per annum or (ii) the prime lending rate as quoted by Bank of America NT&SA
plus 3%, adjusted monthly. During the term of the Standstill Period, on the
first business day of each month, the Company shall pay interest due on all
outstanding borrowings under the Factoring Agreement.
5. The Company incorporates by reference its representations
contained in Article 3 of the Series D Agreement.
6. The provisions of Article 10 of the Series D Agreement are
incorporated herein by reference.
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The foregoing Addendum is hereby executed as of the date first written
above.
"COMPANY"
CROSS/Z INTERNATIONAL, INC.
a California corporation
By: /s/ Xxxx Xxxxxxxxxxxxxx
--------------------------------
Xxxx Xxxxxxxxxxxxxx, President
"HCC"
HCC Financial Services
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx, President
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