Exhibit 10.4
GE CAPITAL COMMERCIAL SERVICES, INC.
000 X. Xxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
February 24 2003
Unzipped Apparel LLC
0000 X. Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Re: Factoring Agreement, entered into concurrently herewith, by
and between Unzipped Apparel LLC, a Delaware limited liability
company ("Client") and GE Capital Commercial Services, Inc.
("Factor") (the "Factoring Agreement")
Ladies and Gentlemen:
Reference is hereby made to the Factoring Agreement and any and all
supplements and agreements entered into in connection therewith (collectively,
the "Factoring Documents") pursuant to which, among other things, Factor has
agreed to factor Client's accounts receivable (the "Factored Accounts") and make
advances to Client against the purchase price of certain Factored Accounts (the
"Advances"). The terms and the provisions of the Factoring Agreement are hereby
incorporated by this reference and except as specifically provided herein all of
the terms and provisions of the Factoring Agreement shall control the
relationship of the parties. All initially capitalized terms used but not
defined herein shall have the meanings attributed to same in the Factoring
Agreement.
Client's accounts receivable are presently being factored with The CIT
Group/Commercial Services ("CIT"). Pursuant to the terms of the factoring
agreement between Client and CIT the existing factoring relationship with CIT is
scheduled to continue until September 30, 2003. As a result, no Accounts will be
factored and no Advances will be made under the Factoring Agreement (i) until
the Client's factoring relationship with CIT has terminated, (ii) the Client has
provided Factor with a payoff letter/letter of indemnity from CIT, in form and
substance acceptable to Factor in its sole and absolute discretion, and (iii)
there does not then exist an Event of Default under the Factoring Agreement
(collectively, the "Triggering Event").
During the interim period from the Effective Date through the
Triggering Event, Factor may, in its sole discretion, from time to time at
Client's request provide Client with advances against factor balances owing from
CIT to Client (the "Due From Factor Advances") up to an aggregate principal
amount outstanding at any one time equal to eighty-five percent (85%) of
confirmed factor balances owing from CIT to Client. Factor has the right, at any
time and from time to time, to adjust this advance rate, hold any reserves it
deems necessary as security for the payment and performance of the Obligations,
and to impose other limitations that it deems necessary on Client's ability to
obtain Due From Factor Advances. In no event shall a Due From Factor Advance be
made or (if applicable) a letter of credit be issued if such Due From Factor
Advance or issuance would cause the sum of (a) outstanding Due From Factor
Advances (as determined and calculated in Factor's sole discretion), plus (b)
the aggregate undrawn amounts of all outstanding letters of credit, plus (c) the
aggregate principal amount of Inventory Advances then outstanding under the
Factoring Agreement - Inventory Supplement, between Factor and Client of even
date herewith, at any time exceed $25,000,000.
Due From Factor Advances may be made available by Factor as provided
herein, provided that: (i) Factor has received satisfactory evidence of
termination of the assignment by Client to Congress of all factor balances owing
to Client by CIT, with the form and substance of same to be acceptable to Factor
in its sole and absolute discretion; (ii) CIT has agreed to the assignment by
Client to Factor of all factor balances pursuant to an assignment of factor
balances agreement executed by and among Client, Factor and CIT, with the form
and substance of same to be acceptable to Factor in its sole and absolute
discretion; (iii) Client has not (1) obtained any loans or advances from CIT,
(2) obtained CIT's guarantee of any amount due or to become due from Client to
any third party, or (3) opened any letters of credit through CIT; (iv) Client is
not factoring its accounts receivable with any other entity other than CIT; (v)
no event of default has occurred under the factoring agreement between CIT and
Client; (vi) no Event of Default has occurred under the Factoring Agreement; and
(vii) Factor is in receipt of evidence of the amount of the factor balances
owing from CIT to Client, with such evidence to be provided on an ongoing basis
as requested by Factor, with the form and substance of same to be acceptable to
Factor in its sole and absolute discretion.
All Due From Factor Advances shall be made according the terms and
subject to the conditions of the Factoring Agreement (including, without
limitation, terms and conditions applicable to Advances such as interest
calculations and repayment obligations) and for all purposes shall constitute
"Obligations" under the Factoring Agreement secured by the Collateral. Client
and Factor agree that the terms and provisions of the Factoring Documents which
contemplate the factoring of accounts receivable and the payment of certain
commissions and fees in connection with such factoring activities will be
postponed until such time that the Triggering Event occurs, if ever.
Assigned factor balances proceeds will be applied against Client's
outstanding Obligations in such order and manner as determined by Factor in its
sole and absolute discretion.
Upon the occurrence of the Triggering Event, any outstanding Due From
Factor Advances shall become outstanding Advances.
Notwithstanding anything to the contrary contained in the foregoing, in
the event that the Triggering Event has not occurred on or before September 30,
2003, Factor may, at its option, deem the non-occurrence of the Triggering Event
an Event of Default under the Factoring Agreement entitling Factor to, among
other things, terminate the Factoring Agreement. Upon the termination of the
Factoring Agreement as a result of the failure of the Triggering Event to occur
on or before September 30, 2003, all Due From Factor Advances, plus any and all
accrued interest thereon shall be immediately due and payable, together with any
and all early termination fees and other Obligations that became due and owing
as a result of such termination, as more particularly described in the Factoring
Agreement.
In consideration of Factor's agreement to provide Due From Factor
Advances, Client agrees to pay: (i) interest on such outstanding Due From Factor
Advances at the interest rate applicable to outstanding Advances under the
Factoring Agreement; (ii) a monthly accommodation fee of $10,000 per month, with
such fee to be prorated for any partial months; and (iii) any other fees set
forth in the Factoring Documents that do not specifically relate to the
factoring of accounts receivable.
Please acknowledge your agreement to the foregoing by executing where
indicated below.
Sincerely,
GE CAPITAL COMMERCIAL SERVICES, INC.
By: /s/ Xxxxxxx Xxxxxxx
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Name: Xxxxxxx Xxxxxxx
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Title: Sr. Vice President
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Agreed to and accepted:
UNZIPPED APPAREL LLC
By: /s/ Xxxxxx Xxxx
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Name: Xxxxxx Xxxx
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Title: CEO
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