as of June 2, 1997
Xxxxxx Xxx Marketing, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx, Chief Financial Officer
NOTIFICATION FACTORING AGREEMENT
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Ladies and Gentlemen:
Reference is made to the Revolving Credit Agreement between us, dated
as of even date herewith (as the same may be amended, modified, supplemented or
restated, the "Credit Agreement"). We are pleased to confirm the terms and
conditions that shall govern the collected funds accounting factoring
arrangement between us, entered into today in conjunction with the Credit
Agreement, on the terms and subject to the conditions contained in this
Notification Factoring Agreement (as the same may be amended, modified,
supplemented or restated, the "Factoring Agreement").
1. SALE OF ACCOUNTS
1. You hereby sell, assign and transfer to us, and we hereby purchase
as absolute owner, all of your accounts receivable created by or arising from
the sale of goods or rendition of services by you (referred to herein
collectively as the "Accounts", individually as an "Account"). This includes,
without limitation, all sales made and services rendered under any of your trade
names or styles or through any of your divisions.
2. CREDIT APPROVAL
2.1 Credit approval of all orders shall be requested from our Credit
Department via computer, in accordance with procedures more particularly
described in the Client Service Guide which we have provided to you, and any
modifications or revisions thereof or supplements thereto which we may hereafter
provide to you (herein the "Guide"). Orders may be submitted by either: (i)
On-Line Terminal Access, in accordance with the procedures more particularly
described in the appropriately marked section of the Guide, or (ii) Electronic
Batch
Transmission, in accordance with the procedures more particularly described in
the supplement to the Guide referred to as the Guide to Batch Data
Communications, provided, however, that during the sixty (60) day period
commencing on the date of this Factoring Agreement, orders may be submitted on a
manual basis by you and will be processed by us. We shall assume the Credit Risk
(the customer's failure to pay an invoice representing an Account in full when
due at its longest maturity because of its financial inability to do so) on each
Account with respect to which the shipment of goods or rendition of services
represented thereby has been credit approved by our Credit Department in
writing, and with respect to which the customer actually receives and finally
accepts delivery of the goods or services. Without our prior written consent,
you shall not change the amount, terms, shipping or delivery dates with respect
to any shipment of goods or rendition of services, or any invoice relating
thereto, whether or not approved by us as to credit, or grant any other
indulgence with respect thereto (other than accepting returns and granting
allowances as provided in paragraph 8 hereof). Credit approval of any shipment
of goods or rendition of services may be withdrawn by us any time before, but
not after, delivery is made. Credit approvals shall be effective only if
shipment is made or services are rendered within forty-five (45) days from the
completion date specified in the approval. Notwithstanding anything to the
contrary contained herein, we shall not assume the Credit Risk on any Account or
portion thereof arising from freight charges, sales of sample merchandise, sales
of merchandise not regularly sold by you, sales of merchandise which is not in
the form or quantity of merchandise normally sold by you, although all such
Accounts shall be purchased by and assigned to us as provided herein. We shall
have no liability whatsoever to you or to any person, firm or entity for not
credit approving, or for withholding or withdrawing credit approval of, any
order. In the event that we decline to credit approve an order from a customer
and, in connection therewith, furnish any information to you regarding the
credit standing of the customer in explanation of our decision, such information
shall be privileged and confidential and shall not be given by you to the
customer, your salesperson or any third party; however, you may advise such
party that any questions relating thereto may be directed to us.
2.2 To indicate credit decisions by our Credit Department each day,
we shall send to you a computer generated Credit Decisions Report. The Credit
Decisions Report shall constitute the official record of our written credit
approvals. All information and exhibits contained in the Guide or on any screen
accessed by you, or any print-outs, reports, statements or notices received by
you are, and shall remain, our exclusive property and shall not be disclosed to
or used by anyone other than you, in whole or part, except after obtaining the
express written permission of an authorized officer of the undersigned.
2.3 Accounts and portions of Accounts on which we bear the Credit
Risk shall be referred to herein collectively as "Factor Risk Accounts", and
individually as a "Factor Risk Account". Accounts and portions of Accounts on
which you bear the risk as to credit shall be referred to herein collectively as
"Client Risk Accounts", and individually as a "Client Risk Account".
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3. INVOICING
3. Each of your invoices shall bear a notice (in form and content
approved by us) that the Account represented thereby has been sold, assigned and
transferred to us, and is owned by and payable only to us. All invoices shall be
mailed by you to your customers at your expense. You shall provide us with
copies of all invoices, and with such confirmation of the transfer of Accounts
to us and such proof of order, shipment or delivery as we may require. Your
printed name or rubber stamp signature on invoices and confirmatory assignment
schedules shall have the same legal effect as a manual signature by one of your
authorized officers or agents. Should you for any reason defer shipment of goods
which you have sold and invoiced to a customer (such sales are also known as
bill and hold sales) you shall: so advise us promptly, submit all relevant
details to us, and comply with such conditions as we deem necessary as a
prerequisite to our handling the Accounts arising therefrom on our books.
4. REPRESENTATIONS AND WARRANTIES
4.1 Each of the representations and warranties made by you in the
Credit Agreement and the Security Agreement (as defined in the Credit Agreement)
are incorporated herein by reference thereto, with the same force and effect as
though each such representation and warranty was fully repeated and restated
herein by you.
4.2 You hereby represent and warrant that: each Account is based upon
an actual and bona fide sale and delivery of goods or rendition of services to
customers, made by you in the ordinary course of your business; the goods and
inventory being sold and the Accounts created are your exclusive property and
are not and shall not be subject to any lien, consignment arrangement,
encumbrance, security interest or financing statement whatsoever, other than in
our favor; your customers have not returned or rejected the goods or services,
have not disputed their obligation to pay the full amounts stated in the
invoices according to their terms, without dispute, nor have your customers
asserted any claim, offset, defense, deduction, recoupment, counterclaim or
contra account (any of the foregoing being referred to herein as a "Customer
Claim"); all amounts are due in United States Dollars; all original invoices
bear notice of the assignment and transfer to us; any taxes or fees relating to
your Accounts or goods are solely your responsibility; and none of the Accounts
factored with us hereunder represent sales to any subsidiary, parent or
affiliated company of yours.
5. PURCHASE OF ACCOUNTS
We shall purchase the Accounts for the gross amount of the respective
invoices, less factoring fees or commissions relating thereto, trade and cash
discounts allowable to your customers and credits and allowances (the "Purchase
Price of Accounts"). Our purchase of the Accounts shall be reflected on the
Statements of Account which we shall render to you, and such statements shall
also reflect all credits and discounts made available to your customers (whether
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or not taken) and anticipation earned by your customers. A more detailed
description of these and all other accounting procedures used hereunder is
contained in the Guide.
6. PAYMENT OF ACCOUNTS
6.1 Checks and other proceeds received by us in payment of Accounts
will be applied to your account with us after crediting your customer's account,
provided, however, that we shall debit your account monthly with the cost of two
(2) additional days on all such Accounts, computed at the rate of interest set
forth in Section 2.05 of the Credit Agreement. The Purchase Price of Accounts
for Accounts with respect to which such remittances have been received and
applied by us, less any amounts chargeable by us hereunder, after application by
us to your customer's account, shall be credited upon such receipt to your
Accounts Receivable Account (as defined below). At the end of each month, the
amount in your Funds-in-Use Account (as defined below) shall be transferred and
credited at the end of such month to your Loan Account (as defined in the Credit
Agreement). No checks, drafts or other instruments received by us shall
constitute final payment of an Account unless and until such instruments have
actually been collected.
6.2 With respect to any Factor Risk Account which remains unpaid, the
Purchase Price of Accounts relating thereto shall be credited to your account as
follows:
(a) as of the date of the Account's longest maturity, if such
customer: makes an assignment for the benefit of
creditors; calls a meeting of its creditors, institutes
any proceeding to compromise or adjust its debts, or if
any proceeding or petition is filed or instituted by or
against such customer for relief under any state or
federal bankruptcy or insolvency law, or if a receiver or
trustee is appointed for the customer; or
(b) as of the last day of the third month following its
longest maturity date, if such Account remains unpaid as
of said date without the happening of any of the events
specified in (a) hereinabove.
Should it subsequently be determined that any Factor Risk Account credited to
your account with us was not paid for any reason other than the customer's
financial inability to do so, we shall reverse the credit and debit your account
accordingly.
7. CUSTOMER CLAIMS AND CHARGEBACKS
You shall notify us promptly of any matter affecting the value,
enforceability or collectibility of any Account and of all Customer Claims,
returns and rejections. You shall issue credit memoranda promptly upon accepting
returns or granting allowances (and upon our request, send duplicates and/or
confirm the assignment of such credit memoranda to us), and may continue to do
so until we have notified you that such credits or allowances are to be made
only after our prior written approval. We shall have the right to adjust
Customer Claims directly with customers, upon such terms as we in our sole
discretion may deem advisable, but
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shall not be required to do so. We shall cooperate in the adjustment of Customer
Claims, but may at any time debit or charge back to your account the amount of:
(a) any Factor Risk Account which is not paid in full when due for any reason
other than the customer's financial inability to do so; (b) any Factor Risk
Account which is not paid in full when due because of an act of God, civil
strife, war and the like, whether or not such occurrence results in financial
inability to do so; (c) any anticipation taken or Customer Claim asserted with
respect to any Factor Risk Account; (d) any Client Risk Account which is not
paid in full on its due date; and (e) any Account with respect to which we
determine that there has been a breach of any representation or warranty
hereunder. Such debit or chargeback shall not constitute a reassignment to you
of the Account involved. Any deduction taken by a customer shall be charged back
to your account immediately, and we may at any time debit or charge back to your
account the amount of: (i) payments we receive on Client Risk Accounts which we
are required thereafter to turnover or return; (ii) any and all expenses and
attorneys' fees incurred by us in collecting or attempting to collect any
Account charged back to you or any Obligation hereunder; and (iii) any expenses
incurred by us as a result of remittances made by customers on Client Risk
Accounts that are not finally paid, for whatever reason. Further, we shall be
entitled to charge you a reasonable fee for each Client Risk Account which we
may place with a collection agency or attorney for collection, which fee shall
be charged to your account in addition to any fees or expenses of such
collection agency or attorney, provided, however, that we shall only place a
Client Risk Account for collection with a collection agency or attorney with
your prior consent, unless an Event of Default (as defined below) has occurred
and is continuing, in which case such consent shall not be required.
8. HANDLING AND COLLECTION OF ACCOUNTS AND RETURNED GOODS
8.1 As owners and assignees of the Accounts, we shall have the right
to bring suit or otherwise enforce collection, in your name or ours, and
generally shall have all other rights respecting said Accounts, including,
without limitation, the right to: accelerate or extend the time of payment,
modify the terms of payment, settle, compromise, release in whole or in part any
amounts owing, and issue credits in your name or ours. To the extent applicable,
you hereby waive any and all claims and defenses based on suretyship. If monies
are due and owing from a customer for both Factor Risk Accounts and Client Risk
Accounts, you agree that any payments or recoveries received in respect of any
such Accounts may be applied first to the Factor Risk Accounts, regardless of
any notation to the contrary on payment items or the due dates of such Accounts,
and whether such payments were made in the ordinary course or otherwise. Once
you have granted or issued a discount, credit or allowance, you shall have no
further interest therein. Any checks, cash, notes or other instruments, proceeds
or property received by you with respect to any Accounts shall be held by you in
trust for us, separate from your own property and funds, and immediately turned
over to us with proper assignments or endorsements. We may endorse or sign your
name or ours on any checks or other instruments or documents with respect to
Accounts or the goods covered thereby.
8.2 At any time that we so request, and immediately upon the
occurrence of an Event of Default (as defined below) or upon termination of this
Agreement, any and all returned, reclaimed or repossessed inventory and goods
shall be set aside by you, marked with our name and held by you in trust for us
as owner, and for our account. Further, upon the occurrence of
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any of the foregoing, you shall promptly notify us of all such inventory and
goods and deliver the same to us, pay us the invoice price thereof, or sell the
same for our account and remit the full proceeds to us.
9. STATEMENTS OF ACCOUNT
After the end of each month, we shall send to you one or more reports
showing the accounting for sales, charges, advances and other transactions
between us during that month (herein the "Reports"). The Reports sent to you
each month will include, among other things, a Statement of Account reflecting
transactions in an accounts receivable account (the "Accounts Receivable
Account"), a client position account (the "Client Position Account") and a
funds-in-use account (which, including all such accounts established on a
divisional basis, as consolidated, is hereinafter referred to as the
"Funds-In-Use Account"), which accounts shall be established on our books in
your name. All financial transactions between us will be reflected on these
monthly Reports. The monthly Reports shall be deemed correct and binding upon
you and shall constitute an account stated between us, unless we receive a
written statement of your exceptions within thirty (30) days after the date the
same are mailed to you.
10. CONFIRMATION OF GRANT OF SECURITY INTEREST
In addition to the sale of Accounts hereunder, pursuant to the
Security Agreement, as defined in the Credit Agreement, as collateral security
for the Obligations, as defined in the Credit Agreement, you have assigned,
pledged, transferred, granted, bargained and sold, confirmed and set over to us,
and you have granted and created in our favor a security interest in and to, the
Collateral (as defined in the Security Agreement), and you hereby confirm and
reaffirm the granting and creation in our favor of a security interest in and to
the Collateral.
11. OBLIGATIONS SECURED
The security interest granted by you in our favor in the Collateral
shall secure the payment and performance of all Obligations to us, as such term
is defined in the Credit Agreement. Any reserves or balances to your credit and
any other property or assets of yours in our possession shall constitute
security for any and all Obligations.
12. BOOKS AND RECORDS AND EXAMINATIONS
You agree: to make your records, files and books of account
(including, without limitation, paper records, computer-based data, records or
media, electronic records, tapes, discs, etc., and all programs and procedure
manuals relating thereto) (all of the foregoing referred to herein as "Books and
Records") available to us on request; to permit us to visit your premises during
business hours to examine the same and to make copies or extracts thereof; and
to conduct such examinations as we deem necessary. In order to cover costs and
expenses we
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may incur in connection with any such examinations, we shall be entitled to
charge you a fee for each day or part thereof during which such examination is
conducted, which fee shall be charged to your account, in addition to any
out-of-pocket costs and expenses we incur as a result of conducting said
examinations.
13. INTEREST, FACTORING FEES OR COMMISSIONS, COLLECTION DAYS AND
OTHER CHARGES
13.1 Interest shall be credited as of the last day of each month (the
"referenced month") on any credit balance in your Funds-In-Use Account each day
during such referenced month. (The amount that appears in your Funds-In-Use
Account is the difference between the balance in your Accounts Receivable
Account and the balance in your Client Position Account.) Interest shall be
calculated hereunder at a rate equal to the Prime Rate (as defined in the Credit
Agreement) in effect on the last day of the previous month plus the applicable
margin, as follows: (i) in the event that any Loan (as defined in the Credit
Agreement) is outstanding at the end of any day during a referenced month, then
the applicable margin with respect to any credit balance in your Funds-in-Use
Account outstanding at the end of such day shall equal one percent (1%),
provided, however, that if the interest rate margin set forth in Section 2.05 of
the Credit Agreement is other than one percent (1%), then the applicable margin
herein shall equal such other interest rate margin as set forth in such Section
and (ii) in the event that no Loan is outstanding at the end of any day during a
referenced month, then the applicable margin with respect to any credit balance
in your Funds-in-Use Account outstanding at the end of such day shall equal
negative three percent (-3%). Any change in the rate of interest hereunder due
to a change in the Prime Rate shall take effect as of the first day of the
referenced month following such change in the Prime Rate. Interest shall be
calculated based on a 360 day year.
13.2 For our services hereunder, we shall be entitled to a factoring
fee or commission of forty hundredths of one percent (.40%) on the gross face
amount of all Accounts factored with us, plus one-quarter of one percent (1/4 of
1%) of the gross face amount of each Account for each thirty-day period or part
thereof by which the longest terms of sale applicable to such Account exceed
sixty (60) days (whether as originally stated or as a result of a change of
terms requested by you or the customer). In addition, with respect to Accounts
arising from sales to customers located in United States territorial
possessions, we shall be entitled to an additional factoring fee or commission
of one percent (1%) on the gross face amount of such Accounts. The factoring fee
or commission shall be due and charged to your account upon our purchase of the
underlying Account. In no event shall the factoring fee or commission payable by
you hereunder for each calendar month or part thereof be less than $10,000.00.
In addition, the minimum factoring fee or commission on each invoice evidencing
an Account shall be $2.00. Finally, we shall be entitled to a monthly fee in the
amount of $200 per month in consideration of your use of our on-line computer
services.
13.3 In addition to the foregoing, you shall pay all costs and
expenses incurred by us in connection with the preparation, execution,
administration and enforcement of this Agreement, including, without limitation,
all reasonable fees and expenses, if any, attributable to the services of our
attorneys (whether in-house or outside), all search fees and the cost of all
public record filings. Furthermore, you shall pay to us a reasonable fee for:
(i) all special reports prepared
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by us at your request; (ii) all wire transfers; (iii) handling all change of
terms requests relating to Accounts; and (iv) each new customer set-up on our
accounts receivable data base, all as more fully described in the Guide. All
such fees shall be charged to your account when incurred and may be changed by
us from time to time upon notice to you.
13.4 If any tax by any governmental authority (other than income and
franchise taxes imposed on us which are not related to any transaction between
us) is or may be imposed on, or arises as a result of, any transactions between
us, any sales made by you, or any inventory or goods relating to such sales, and
we are or may be required to withhold or pay such tax and any interest or
penalties related thereto, you shall indemnify and hold us harmless in respect
thereof and pay to us the amount of any such tax, interest or penalties.
14. TERMINATION
Either of us may terminate this Agreement for any reason whatsoever,
but only (i) in conjunction with the simultaneous termination of the Credit
Agreement and (ii) as of an Anniversary Date, as defined herein, and then only
by giving the other of us at least sixty (60) days prior written notice of
termination. Notwithstanding the foregoing, we may terminate this Agreement
immediately at any time, without prior notice to you, upon and after the
occurrence of an Event of Default (as defined below). This Agreement continues
uninterrupted unless terminated as herein provided. As used herein, the term
"Anniversary Date" shall mean the last day of the month occurring two years from
the date hereof and the same date in every year thereafter. Unless sooner
demanded, all Obligations shall become due and payable upon termination of this
Agreement and, pending a final accounting, we may withhold any balances in your
account unless supplied with an indemnity satisfactory to us to cover all
Obligations. All our rights, liens and security interests hereunder shall
continue and remain in effect after termination of this Agreement, whether said
termination is upon notice or as a result of the occurrence of an Event of
Default, and you shall continue to assign accounts receivable to us and to remit
to us all collections on accounts receivable, until all Obligations have been
paid in full or we have been supplied with an indemnity satisfactory to us to
cover all Obligations.
15. EVENTS OF DEFAULT AND REMEDIES UPON DEFAULT
15.1 An Event of Default shall be deemed to have occurred under this
Agreement upon: (a) the breach by you of any representation, warranty or
covenant contained herein or (b) the occurrence of any "Event of Default" under
the Credit Agreement.
15.2 Upon and after the occurrence of an Event of Default, this
Agreement may be terminated by us immediately at any time, without notice to
you, all Obligations shall, at our option and without notice or demand of any
kind (all of which you hereby expressly waive), become due and payable
immediately and we may exercise all rights and remedies available to us, whether
at law, in equity, pursuant to the Security Agreement, as defined in the Credit
Agreement, or otherwise. Further, we may remove, from any premises where the
same may be located, any and all documents, instruments, Books and Records (and
any receptacles or cabinets containing the same) pertaining to the Accounts or
other collateral hereunder and/or we
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may use (at your expense) such of your personnel, supplies and space at your
place of business or elsewhere, as may be necessary to properly administer and
enforce our rights in the Accounts and any other collateral hereunder, and to
facilitate the collection thereof and realization thereon. We may sell, assign
or otherwise dispose of the Accounts and any returned, reclaimed or repossessed
inventory, goods or other property relating thereto, whether held by you or by
us, at public or private sale, for cash, on credit or otherwise, at such price
and on such terms as we in our sole option and discretion may determine, and we
may bid or become purchasers at any such sale, or acquire an interest in or
dispose of said property. You hereby acknowledge that you have no right to
notice, or to an accounting or right of redemption with respect to any such sale
or other disposition of the aforesaid Accounts or aforesaid goods. Upon and
after the occurrence of an Event of Default, or in the event of a termination of
this Agreement by us, we are hereby authorized by you to notify postal
authorities at any time to change the address for delivery of mail to you to
such address as we may designate, and to receive and open mail addressed to you
to enable us to carry out our rights under this Agreement.
16. MISCELLANEOUS PROVISIONS
16.1 This Agreement, and all attendant documentation, as the same may
be amended from time to time, constitutes the entire agreement between us with
regard to the subject matter hereof, and supersedes any prior agreements or
understandings. Furthermore, unless specifically provided otherwise herein, this
Agreement can be changed only by a writing signed by both of us, and shall bind
and benefit each of us and our respective successors and assigns, provided,
however, that you may not assign this Agreement or your rights hereunder without
our prior written consent. Our failure or delay in exercising any right
hereunder shall not constitute a waiver thereof or bar us from exercising any of
our rights at any time. The validity, interpretation and enforcement of this
Agreement shall be governed by the laws of the State of New York.
16.2 If any provision of this Agreement (including, without
limitation, any provision relating to charges constituting interest payable by
you) is contrary to, prohibited by, or deemed invalid under applicable laws or
regulations, such provision shall be inapplicable and deemed omitted to the
extent so contrary, prohibited or invalid, but the remainder hereof shall not be
invalidated thereby and shall be given effect so far as possible.
16.3 Paragraph headings are for convenience only and shall not be
deemed to be a controlling part of this Agreement.
17. JURY TRIAL WAIVER
TO THE EXTENT PERMITTED BY APPLICABLE LAW, YOU AND WE EACH HEREBY
WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING DIRECTLY
OR INDIRECTLY OUT OF THIS AGREEMENT, OR ANY OTHER AGREEMENT OR TRANSACTION
BETWEEN US OR TO WHICH WE ARE BOTH PARTIES.
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If the foregoing is in accordance with, and accurately reflects, your
understanding, please so indicate by signing and returning to us the original
and one copy of this Agreement. This Agreement shall take effect as of the date
set forth above, but only after being accepted below by one of our officers in
New York, after which, we shall forward your fully executed copy to you for your
files.
Very truly yours,
THE CIT GROUP/COMMERCIAL
SERVICES, INC.
By /s/ Xxxx Xxxxxxxxxxx
------------------------
Name: Xxxx Xxxxxxxxxxx
Title: Vice President
Read and Agreed to:
XXXXXX XXX MARKETING, INC.
By /s/ Xxxxxx X. Xxxxxxx
------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President, Chief
Financial Officer and Treasurer
Accepted at New York, New York
THE CIT GROUP/COMMERCIAL
SERVICES, INC.
By /s/ Xxxx Xxxxxxxxxxx
------------------------
Name: Xxxx Xxxxxxxxxxx
Title: Vice President
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