XXXXXX FINANCIAL
June 24, 1991
Tag-It, Inc.
0000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
RE: Collection Date Factoring Agreement
Gentlemen:
The following shall constitute the terms upon which we shall act as your sole
factor (see Section 12 for the definition of certain capitalized terms):
SECTION 1. SALE AND APPROVAL OF ACCOUNTS
1.1 You hereby sell, assign and transfer to us and we hereby purchase from
you all of your now outstanding and hereafter created or acquired
Accounts, with full power to collect and otherwise deal therewith as the
sole and exclusive owner thereof.
1.2 (a) You will submit for our credit approval your customers' credit
requirements, a description of your normal selling terms and such other
information as we may request concerning your customers. We may, in our
sole credit judgment, establish credit lines for sales to your customers
on your normal selling terms and all sales to such customers within the
established credit line will be Approved Accounts provided that delivery
or performance is completed while the credit line remains in effect. You
may also submit for credit approval specific orders from your customers
and we may, in our sole credit judgment, approve such orders on a single
order approval basis. All of our credit approvals will be in writing.
(b) We reserve the right to amend or withdraw a credit line at any
time by advice to you, which advice will be promptly confirmed in
writing.
(c) We may withdraw a single order credit approval by notifying you
verbally and/or in writing at any time prior to the delivery of goods or
performance of services. A single order credit approval will be
automatically withdrawn: (i) in the event delivery or performance is not
made on or prior to the expiration date indicated on the written single
order credit confirmation form we send to you; or (ii) in the event any
change is made in the payment terms or delivery date of the Account.
(d) We shall have no liability to you or to any customer for our
refusal to credit approve an Account or our withdrawal of a credit
approval.
1.3 We will assume the Credit Risk on all Approved Accounts. We shall have
full recourse to you for all Non-Approved Accounts.
1.4 In the event that monies shall, at any time, be owing from one of your
customers for both Approved Accounts and Non-Approved Accounts, we will
apply all payments received as follows:
(a) if we issued single order approvals, all payments received will
be first applied to the Approved Accounts;
(b) if we established a credit line for the customer, (i) provided
that the amount of outstanding Accounts did not at any time exceed twice
the established credit line and the credit line is still in effect at the
time payment is received, all payments shall first be applied to the
Non-Approved Accounts; (ii) if the amount of outstanding Accounts did at
any time exceed twice the established credit line or if prior to the
receipt of payment we have withdrawn the credit line, all payments
received shall first be applied to Approved Accounts;
(c) if an insolvency proceeding has been instituted by or against the
customer, we shall share all payments pro rata.
SECTION 2. PAYMENT AND FEES
2.1 We will purchase each Account on the longest or shortest selling terms,
at our option, and will pay you as the purchase price the net amount
thereof calculated by deducting from the gross amount of each Account the
discount, if any, our factoring commission and all credits, including,
without limitation, merchandise returns, allowances, and chargebacks and
all other charges provided for hereunder. The purchase price less
advances, interest and any other amounts due us will be credited to your
account on the Collection Date.
2.2 At the time we purchase each Account, or thereafter, we may, upon your
request, and in our sole discretion, advance to you up to eighty percent
(80%) of the purchase price of such Account; PROVIDED, however, that if
at any time the aggregate Net Amount of Accounts arising from sales to a
single customer exceeds an amount equal to thirty percent (30%) of the
total Net Amount of all Accounts from all customers outstanding at such
time, we shall not make any advances on any such Accounts in excess of
said amount.
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2.3 At the time we purchase each Account, you will pay us a factoring
commission of one and one-half percent (1.5%) of the Net Amount. On
Accounts bearing terms in excess of sixty (60) days ("standard terms"),
the factoring commission will be increased by one-quarter of one percent
(0.25%) for each thirty (30) days or part thereof that the stated terms
exceed the standard terms. If during any month the aggregate Net Amount
of all Accounts purchased by us during such month divided by the number
of Accounts purchased by us during such month is less than $750, then you
shall pay us, or we may charge your account with, an amount equal to
one-eighth of one percent (0.125%) of the aggregate Net Amount of all
Accounts purchased by us during such month. If you factor a credit memo
relating to an Account for which you paid a factoring commission, we will
refund a portion of the commission pro rated according to the amount of
the credit memo.
2.4 We will charge your account our standard wire transfer fee on all wire
transfers, and you will reimburse us for exchanges on checks, charges for
returned items and all other bank charges. We may also, at our option,
charge your account for all amounts owing by you to us under this
Agreement and for all other Obligations.
SECTION 3. INTEREST AND COLLECTION CLEARANCE CHARGE
3.1 You will pay us interest on the daily balance of all monies we advance to
you or for your account net of all payments received from you or on your
behalf and net of the purchase price of Accounts. Interest will be
calculated daily at a rate per annum equal to two and one-half percent
(2.5%) plus the Base Rate (the "Interest Rate") and will be charged to
your factoring account at the end of each month. The Interest Rate will
also be charged to you on all other indebtedness due by you to us under
this Agreement and on all Obligations, except those specifying a
different rate, from the date incurred through the date paid. Any
publicly announced decrease or increase in the Base Rate shall result in
an adjustment to the Interest Rate on the next business day. Interest
shall be calculated on the basis of a 360-day year for the actual number
of days elapsed. In no event shall the Interest Rate exceed the maximum
rate permitted by applicable law and in the event excess interest is
paid, it shall be considered a repayment of principal.
3.2 To allow for collection clearance on all checks and other payments
remitted by your customers, you will, in addition to interest, pay us a
monthly collection clearance charge based on a formula involving total
cash collections for the month, the Interest Rate, and five Business
Days. We will charge your account at the end of each month for the
collection clearance charge.
3.3 If funds remain with us past the Collection Date ("matured funds"), we
will pay you interest on such matured funds at the rate per annum equal
to the Base Rate minus three percent (3.0%). Any change in the Base Rate
shall result in an adjustment in the matured funds rate on the next
business day.
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3.4 If an Approved Account is charged back to you after the date described in
subsection 12.5 (b), you will pay us interest at the Interest Rate on the
Net Amount from such date to the chargeback date.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 You represent, warrant and covenant as to each Account sold and assigned
hereunder that, at the time of its creation, the Account is a valid, bona
fide account, representing an undisputed indebtedness incurred by the
named account debtor for goods actually sold and delivered or for
services completely rendered; there are no setoffs, offsets or
counterclaims, genuine or otherwise, against the Account; the Account
does not represent a sale to a parent, subsidiary or affiliate or a
consignment, sale or return or a xxxx and hold transaction; no agreement
exists permitting any deduction or discount (other than the discount
stated on the invoice); you are the lawful owner of the Account and have
the right to sell and assign the same to us; the Account is free of all
security interests, liens and encumbrances other than those in our favor,
and the Account is due and payable in accordance with its terms.
4.2 You shall not grant or suffer to exist any lien upon or security interest
in your inventory in favor of any party other than us without our written
consent.
4.3 You are a solvent corporation; duly incorporated and in good standing
under the laws of the State of California and qualified in all States
where such qualification is required; the execution, delivery and
performance of this Agreement have been duly authorized and are not in
contravention of any applicable law, your corporate charter or by-laws or
any agreement or order by which you are bound.
4.4 You shall not change your corporate name or the location of your office
or open any new offices without giving us at least thirty (30) days prior
written notice. At the present time, you carry on business only at the
above address and the addresses set forth below.
NONE
4.5 All books and records pertaining to the Accounts or to any inventory
owned by you shall be maintained solely and exclusively at the above
address or the addresses listed in Section 4.4 hereof and no such books
and records shall be moved or transferred without giving us thirty (30)
days prior written notice.
4.6 You shall not sell, lease, transfer or otherwise dispose of all or
substantially all of your property or assets, or consolidate with or
merge into or with any corporation or entity without our prior written
consent.
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4.7 After our request, you shall hold all returned, replevied or reclaimed
goods coming into your possession in trust for us and all such goods
shall be segregated and identified as held in trust for our benefit and
you shall, at our request, and at your expense, deliver such goods to
such place or places as we may designate.
4.8 The trade names or styles set forth below are the only trade names or
styles under which you transact business; Accounts sold to us hereunder
and represented by invoices bearing such trade names or styles are wholly
owned by you; the undertakings, representations and warranties made in
connection therewith shall be identical to and of the same force and
effect as those made with respect to invoices bearing your corporate
name; your use of any trade names or styles is in compliance with all
laws regarding the use of such trade names or styles. You shall give us
thirty (30) days prior written notice of the change of any trade name or
style or your use of any new trade name or style.
NONE
4.9 No discounts, credits or allowances will be issued, granted or allowed by
you to customers and no returns will be accepted without our prior
written consent; provided, however, that until we notify you to the
contrary, you may presume our consent. Discounts, credits or allowances
once issued may be claimed only by the customer.
SECTION 5. DISPUTES, CHARGEBACKS AND RESERVES
5.1 With respect to any Account, upon the occurrence of a breach of any of
the representations or warranties contained in Section 4.1, or upon the
assertion by a customer of a Dispute, we may charge back such Account to
you.
5.2 You shall notify us immediately in the event that a customer alleges any
Dispute, or returns or desires to return any goods purchased from you.
We may but are not obligated to settle, compromise, adjust or litigate
all such Disputes or returns upon such terms as we deem advisable. If an
unadjusted Dispute delays the payment of any Approved Account when due,
we shall have the right to charge back to you that Account.
5.3 We may, at our option, charge back to you all amounts owing on
Non-Approved Accounts which are not paid when due.
5.4 We shall have the right to charge back to you any payment which we
receive with respect to a Non-Approved Account if such payment is
subsequently disgorged by us, whether as a result of any proceeding in
bankruptcy or otherwise.
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5.5 A chargeback shall not constitute a resale to you of said Accounts;
however, upon payment by you to us of all monies due with respect to such
charged back Account, title thereto shall revert to you, subject,
however, to our security interest therein. You agree to indemnify and
save us harmless from and against any and all loss, costs and expenses
caused by or arising out of disputed Accounts, including, but not limited
to, collection expenses and attorney's fees incurred with respect
thereto.
5.6 We may maintain such reserves as we, in our sole discretion, deem
advisable as security for the payment and performance of the Obligations.
SECTION 6. ADMINISTRATION
6.1 (a) You shall, from time to time, execute and deliver to us
confirmatory schedules of Accounts sold to us, together with one copy of
each invoice and, upon request, acceptable evidence of shipment and such
other documentation and proofs of delivery as we may require. Each
invoice and all copies thereof shall bear a notice, in form satisfactory
to us, that it has been sold and assigned to and is payable only to us.
You agree to prepare and mail all invoices, but we may do so at our
option. You agree to execute and deliver to us such further instruments
of assignment, financing statements and instruments of further assurance
as we may reasonably require. You authorize us to execute on your behalf
and file such UCC financing statements as we may deem necessary in order
to perfect and maintain the security interests granted by you in
accordance with this and any other agreement between you and us, and you
further agree that we may file this agreement or a copy thereof as such
UCC financing statement. You agree to bear the cost of all filing fees,
filing taxes, search reports, legal fees and other charges incurred by us
in the perfection, protection and preservation of the rights and
collateral security herein granted to us.
(b) If any remittances are made directly to you, your employees or
agents, you shall act as trustee of an express trust for our benefit,
hold the same as our property and deliver the same to us forthwith in
kind. We and/or such designee as we may from time to time appoint are
hereby appointed your attorney-in-fact to endorse your name on any and
all checks or other forms of remittances received by us where such
endorsement is required to effect collection and to transmit notices to
customers, in your name or in ours, that amounts owing by them have been
assigned and are payable directly to us; this power, being coupled with
an interest, is irrevocable.
(c) We may, at all times, have access to, inspect and make extracts
from all of your records, files and books of account. We may, at any
time after default by you hereunder, remove from your premises all such
records, files and books relating to Accounts. You will promptly furnish
us with all statements prepared by or for you showing your financial
condition and the results of your operations and such other statements as
we may reasonably require. You authorize us to communicate directly
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with your independent certified public accountants and authorize such
accountants to discuss your financial condition and statements directly
with us.
6.2 If we determine that the credit standing of a customer has deteriorated
after we have assumed the Credit Risk on an Account, you shall, at our
request, exercise such rights as you may have to reclaim or stop the
goods in transit, and you hereby grant us the right to take such steps in
your name or ours.
6.3 We shall render a monthly statement of account to you within twenty (20)
days after the end of each month. Such statement of account shall
constitute an account stated unless you make written objection thereto
within thirty (30) days from the date such statement is mailed to you.
6.4 You authorize us to disclose such information as we deem appropriate to
persons making credit inquiries about you.
SECTION 7. COLLATERAL SECURITY
As collateral security for all Obligations, you hereby assign and grant
to us a continuing security interest in: (i) all of your presently
existing and hereafter created Accounts and general intangibles and the
proceeds thereof; (ii) all monies, securities and other property now or
hereafter held or received by, or in transit to us from or for you,
whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all of your deposits and credit balances in our
possession; (iii) all returned, reclaimed or repossessed goods and the
documents evidencing or relating to such goods; (iv) all books, records
and other property at any time evidencing or relating to the Accounts;
and (v) the proceeds of any insurance policies covering any of the
foregoing. Recourse to the collateral security herein provided shall not
be required, and you shall at all times remain liable for the payment and
performance of the Obligations upon demand by us.
SECTION 8. EVENTS OF DEFAULT
The occurrence of any of the following acts or events shall constitute an
Event of Default: (a) if you fail to make payment of any of the
Obligations when due; (b) if you fail to make any remittance required by
this Agreement; (c) if you commit any breach of any of the terms,
representations, warranties, covenants, conditions or provisions of this
Agreement, or of any present or future supplement or amendment hereto or
of any other agreement between us; (d) if you become insolvent or unable
to meet your debts as they mature; (e) if you deliver to us a false
financial statement; (f) if you call, or have called by a third party, a
meeting of creditors; (g) if you have commenced by or against you any
bankruptcy proceeding, insolvency, arrangement or similar proceeding; (h)
if you suspend or discontinue doing business for any reason; (i) if a
receiver or trustee of any kind is appointed for you or any of your
property; (j) if any guarantor of
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your Obligations shall become insolvent or have commenced by or against
such guarantor any bankruptcy proceeding, insolvency, arrangement or
similar proceeding; (k) if any guaranty of your Obligations is
terminated; (l) if any change of ownership occurs with respect to more
than forty (40%) percent of your capital stock; or (m) if a notice of
lien, levy or assessment is filed of record with respect to all or any of
your assets by the United States or any department, agency or
instrumentality thereof or by any state, county, municipal or other
governmental agency.
Upon the occurrence of an Event of Default, we shall have the right to
terminate this Agreement and all other arrangements existing between us
forthwith and without notice, and the Obligations shall mature and become
immediately due and payable and we shall have the right to withhold any
further payments to you until all Obligations have been paid in full. In
addition we shall have all of the rights of a secured party under the
Uniform Commercial Code, including, without limitation, the right to take
possession of any collateral in which we have a security interest and to
dispose of same at public or private sale and you will be liable for any
deficiency. We shall not be required to proceed against any collateral
but may proceed against you directly. In the event any action is brought
to enforce, contest, challenge, modify or invalidate the terms of this
Agreement, including, but not limited to, any lawsuit or arbitration, you
agree to pay our costs and reasonable attorney's fees incurred therein.
SECTION 9. TERM AND TERMINATION
This Agreement shall continue in force and effect until terminated by
either party hereto giving the other party not less than sixty (60) days
prior written notice thereof. Notice of termination shall be given by
messenger, registered or certified mail or commercial delivery service;
provided, however, that you shall not terminate this Agreement so long as
you are indebted or obligated to us in connection with any other
financing arrangements. Notwithstanding such notice of termination, our
respective rights and obligations arising out of transactions having
their inception prior to the specified date of termination shall not be
affected by such termination and all terms, provisions and conditions
hereof, including but not limited to, the security interests hereinabove
granted to us, shall continue in full force and effect until all
Obligations have been paid in full. All of the representations,
warranties and covenants made herein shall survive the termination of
this Agreement.
SECTION 10. MODIFICATIONS
This Agreement cannot be changed or terminated orally; it constitutes the
entire agreement between us and shall be binding upon our respective
successors and assigns, but may not be assigned by you without our prior
written consent. No delay or failure on our part in exercising any
right, privilege, or option hereunder shall operate as a waiver thereof
or of any other right, privilege or option. No waiver whatsoever shall
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be valid unless in writing, signed by us, and then only to the extent
therein set forth. If any term or provision of this Agreement is held
invalid under any statute, rule or regulation of any jurisdiction
competent to make such a decision, the remaining terms and provisions
shall not be affected, but shall remain in full force and effect.
SECTION 11. GOVERNING LAW, VENUE AND WAIVER OF JURY
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA. YOU HEREBY CONSENT TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN THE
STATE OF CALIFORNIA. IF YOU PRESENTLY ARE, OR IN THE FUTURE BECOME, A
NON-RESIDENT OF THE STATE OF CALIFORNIA, YOU HEREBY WAIVE PERSONAL
SERVICE OF ANY AND ALL PROCESS AND AGREE THAT ALL SUCH SERVICE OF PROCESS
MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
DIRECTED TO YOU, AT YOUR ADDRESS APPEARING IN OUR RECORDS AND SERVICE SO
MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED AS
AFORESAID.
YOU HEREBY WAIVE YOUR RIGHT TO TRIAL BY JURY IN ANY SUIT OR PROCEEDING
ARISING UNDER OR RELATING TO THIS AGREEMENT.
SECTION 12. DEFINITIONS
12.1 "Accounts" -- All presently existing and hereafter created accounts,
contract rights and general intangibles relating thereto, notes, drafts
and other forms of obligations owed to or owned by you arising or
resulting from the sale of goods or the rendering of services, all
proceeds thereof, all guaranties and security therefor, and all goods and
rights represented thereby or arising therefrom including, but not
limited to, the right of stoppage in transit, replevin and reclamation.
12.2 "Approved Account" -- An Account with respect to which we have issued a
credit approval which has not subsequently been withdrawn.
12.3 "Base Rate" -- The rate of interest publicly announced from time to time
by Bank of America National Trust and Savings Association as its prime or
base rate (or equivalent).
12.4 "Business Day" -- Any day, excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the states of Illinois or California
or is a day on which banking institutions located in any such states are
closed.
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12.5 "Collection Date" -- (a) the date on which we receive payment of an
Account, or (b) in the event an Approved Account remains unpaid, the date
which is 120 days after the due date of such Account, provided that the
customer has not asserted a Dispute.
12.6 "Credit Risk" -- The risk that a customer will be financially unable to
pay an Account at maturity, provided that the merchandise has been
received or services rendered and accepted by the customer without
Dispute.
12.7 "Dispute" -- A dispute or claim, bona fide or otherwise, as to price,
terms, quantity, quality, delivery of goods or any cause or defense to
payment whatsoever other than financial inability to pay.
12.8 "Net Amount" -- The gross face amount of an Account less the discount
offered by you and taken by us.
12.9 "Non-Approved Account" -- An Account with respect to which we have not
issued a credit approval or have subsequently withdrawn a credit
approval.
12.10 "Obligations" -- All loans, advances, debts, liabilities, obligations,
covenants and duties owing by you to us, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising,
including, without limitations, invoices for goods or services purchased
by you from any company whose accounts are factored or financed by us and
indebtedness arising under any guaranty made by you or issued by us on
your behalf.
SECTION 13. ACCEPTANCE
This proposal is submitted to you unsigned and shall constitute an
agreement between us only when signed by us.
Very truly yours, ACCEPTED AND AGREED:
XXXXXX FINANCIAL INC. TAG-IT, INC.
By: /s/ By: /s/
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Title: A.V.P. Title: Pres.
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