EXHIBIT 10.42.1
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NATIONSBANC COMMERCIAL CORPORATION
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
June 9, 1997
Tarrant Apparel Group
0000 Xxxx Xxxxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Attn.: Xxxx Xxxxxxx
Re: Factoring Agreement Between Us Dated September 28, 1993
(as amended, the "Factoring Agreement")
Gentlemen:
We hereby agree with you that the Factoring Agreement is amended as follows:
1. Delete the definition of "Sales" in Section 1.12 and replace it with the
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following:
1.12 "Sales" shall mean the sale of goods and/or the rendition of services
by us in the ordinary course of business to Customers in the United States
of America and Puerto Rico other than sales to Xxxxxx New York, a division
of The Limited Corporation, and Target Stores, a division of Xxxxxx Xxxxxx
Corporation
2. Delete Section 2.3 and replace it with the following:
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2.3 All orders for Sales shall be submitted to you for credit approval
prior to shipment of the goods or rendition of the services so ordered, and
each approved Sale shall be made only in accordance with such approval. All
credit approvals must be in writing. Receivables arising from orders not so
approved by you, in whole or in part, shall be with full recourse to us to
the extent and in the respects not so approved. A credit approval shall not
be effective if (a) the approved terms of sale are changed, (b) delivery of
the goods to the Customer is not made by us within forty-five (45) days
after the shipping date specified in our request for credit approval, or,
if no such date is specified, within forty-five (45) days after the date of
the credit approval,
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or (c) the invoice representing the Sale is not delivered to you within
twenty (20) days after the shipment date. Credit approval may be by credit
line. While a credit line remains in force, Receivables (or parts thereof)
in excess of such line will succeed amounts within the line which are paid
by or credited to the Customer; the succession of Receivables (or parts
thereof) shall take place in the order of maturity and shall be limited to
amounts then so paid or credited. The right of succession ceases when the
line is cancelled. On all credit-approved Sales you assume the Credit Risk
up to the amount so approved and will bear the credit loss on the amount of
the uncollected Receivables if a Customer, after delivery/rendition and
acceptance of the goods/services, fails on due date to pay in full solely
because of financial inability, but you are not to be responsible where
nonpayment results from any Customer Dispute, acts of God, war, civil
strife, currency restrictions, or foreign political impediments, because we
assume all other risks; provided, however, that all credit-approved
Receivables to the Customers listed on Annex I attached hereto (the
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"Specific Customers") shall be with full recourse to us until we have
established in any Contract Year, with respect to credit-approved
Receivables purchased by you with respect to Sales to the Specific
Customers, aggregate Ultimate Net Credit Losses in excess of our Maximum
Initial Loss Liability. As used herein, "Contract Year" shall mean the
twelve (12) month period commencing on May 1, 1997 and each succeeding
twelve (12) month period thereafter; "Ultimate Net Credit Loss" shall mean
the amount reasonably determined by you to be the difference between the
Net Amount of the affected Receivable and the recovery with respect to that
Receivable as of the date when the amount of such recovery can be
reasonably determined under all relevant facts and circumstances, when
nonpayment results from the Customer's financial inability; and "Maximum
Initial Loss Liability" shall mean as to each Contract Year US One Million
Dollars (US$1,000,000). Credit approvals, once granted, may be withdrawn by
you prior to shipment/rendition of the goods/services. With regard to Sales
without credit approval or in excess of any approved amount of credit, as
to any given Customer, we agree that any payments or credits on any
Receivables owing from such Customer may be applied first to any credit-
approved Receivables which may at any time be unpaid, regardless of the
respective dates such Sales occurred and regardless of any notations on
payment items, or may be applied in such other manner as you in your sole
discretion shall deem appropriate.
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3. Delete Section 2.5 and replace it with the following:
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2.5 The purchase price of Receivables is to be the Net Amount thereof,
which, less any charges and reserves, will be due and payable on Payment
Date. We shall pay you a commission in an amount equal to (a) two-tenths of
one percent (0.20%) of the gross amount of such Receivables, in the case of
Sales to Specific Customers (as defined in Section 2.3 hereof), for the
first sixty (60) day term or part thereof, and (b) six-tenths of one
percent (0.60%) of the gross amount of such Receivables, in the case of
Sales to other Customers, for the first sixty (60) day term or part
thereof. You may reasonably retain from sums payable to us a reserve, which
reserve may be revised from time to time at your discretion, in order to
provide for Customer Disputes, possible credit losses on unapproved
Receivables, sums owing to you for goods/services purchased by us from any
other firm factored or otherwise financed by you, and the Obligations. A
discount, credit, or allowance after issuance or granting may not be
claimed by us, but may be claimed solely by the Customer; no third party
beneficiary rights are created hereby.
4. Delete Section 2.6 and replace it with the following:
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2.6 Prior to Payment Date, upon our request and at your sole discretion,
you may advance to us up to (a) ninety percent (90%) of the purchase price
of Receivables less charges and reserves plus (b) ninety percent (90%) of
the face value of Eligible Receivables due and owing at such time less
charges and reserves. As used herein, "Eligible Receivables" shall mean all
non-factored Receivables except: (i) those which are past due sixty (60)
days or more; (ii) those arising from sales to affiliates; (iii) those
subject to Customer Dispute; (iv) those with respect to which we have
breached any warranty or representation; (v) those with respect to a
Customer that is more than sixty (60) days past due on more than fifty
percent (50%) of the Receivables for which it is obligated; (vi)
Receivables from Sales to federal, state or local governmental entities or
agencies; (vii) those for which you are not or do not continue to be, in
your sole discretion, satisfied with the credit standing of the Customer in
relation to the amount of credit extended; (viii) those for which letters
of credit have been issued unless such letters of credit have been
transferred to you under documents satisfactory to you; (ix) those arising
from Sales for which the terms are more than ninety (90) days; (x) those
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arising from Sales in which our performance has been bonded; and (xi) those
which you in your sole discretion deem to be ineligible. At any time that
advances are outstanding against Eligible Receivables, we shall submit to
you a borrowing base certificate by the tenth day of the month (as of the
last day of the preceding month), in form acceptable to you, setting forth
the calculations necessary to determine the maximum amount of advances
hereunder. We represent and warrant that each Receivable included in a
borrowing base certificate as an "Eligible Receivable" shall meet the
criteria enumerated above.
5. Delete Section 3 and replace it with the following:
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SECTION 3. INTEREST
Interest shall be charged for the number of days that advances of the
purchase price are made prior to Payment Date and for the number of days
that advances or other charges to our account remain outstanding at a rate
equal to one and one-quarter percent (1.25%) per annum plus the applicable
LIBOR Index Rate (unless it becomes illegal or impracticable for you to
obtain funds at the LIBOR Index Rate in which case the rate shall be equal
to the Prime Rate minus one and one-quarter percent (1.25%)); except,
however, in either case, that the interest rate shall in no event be less
than five percent (5.0%) per annum. As used herein, "LIBOR Index Rate"
shall mean the rate of interest as determined by you, as of the last
Banking Day of each calendar month, as the rate at which you are able, in
accordance with your normal practice, to acquire U.S. Dollar deposits in
the London Interbank Market or comparable market for a period of thirty
(30) days, adjusted to compensate you for reserve requirements, FDIC
insurance, and any increased costs resulting from changes in any law, rule
or regulation or in the interpretation of any thereof. Interest shall be
computed on the basis of a year of three hundred sixty (360) days, for
actual days elapsed. Changes in the interest rate applicable to LIBOR Index
Rate advances (or, in the event the Prime Rate is applicable in accordance
with this Section 3, applicable to Prime Rate advances) shall be effected
monthly to reflect changes in the LIBOR Index Rate (or Prime Rate), as
follows: The rate shall be adjusted on the first day of each month based on
the LIBOR Index Rate (or the Prime Rate) in effect at the close of business
on the last Banking Day of the immediately preceding month. After
termination, we shall pay interest on our
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obligations hereunder at the rate of the Prime Rate minus one and one-
quarter percent (1.25%) per annum with changes to such rate of interest to
take effect as hereinbefore provided. For the purpose of interest
calculation, commissions earned during each month shall be deemed charged
to our account on the fifteenth (15th) day of each month.
6. Delete Section 5 and replace it with the following:
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SECTION 5. SECURITY INTEREST
We hereby grant you a security interest in all of our present and
future accounts, instruments, contract rights, chattel paper, documents and
general intangibles, (whether arising before or after termination of this
Agreement) and all returned, repossessed, and reclaimed goods, and books
and records relating thereto, arising out of or in any way related to the
Sales, to secure all of the Obligations. We further sell and assign to you
all our title and/or interest in the goods (unless released by you)
represented by Receivables as well as goods returned by or repossessed from
Customers, all of our rights as an unpaid vendor or lienor, all of our
rights of stoppage in transit, replevin and reclamation relating thereto,
and all of our rights against third parties with respect thereto; we will
cooperate with you in exercising any rights with respect to the goods. In
addition, we hereby grant you a security interest in the reserve
established pursuant to Section 2.5 hereof, to secure all of the
Obligations.
This amendment shall be effective as of May 1,1997.
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All other terms and conditions of the Factoring Agreement shall continue in full
force and effect.
Please signify your agreement to the foregoing by signing where indicated below.
NATIONSBANC COMMERCIAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxxx
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Title: Senior Vice President
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Read and agreed:
TARRANT APPAREL GROUP
By: /s/ Xxxx X. Xxxxxxx
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Title: Vice President-Finance & CFO
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ANNEX I
1. Wal-Mart and its affiliates
2. Sears and its affiliates
3. The Limited and its affiliates and subsidiaries
4. Xxxxxx Xxxxxx Stores and its affiliates and subsidiaries (including
Target and Mervyns)
