EXHIBIT 10.32
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FORBEARANCE AGREEMENT
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FORBEARANCE AGREEMENT, dated of as February 16, 2001, by and between
AVID SPORTSWEAR, INC., a California corporation ("CLIENT"), and GE CAPITAL
COMMERCIAL SERVICES, INC., a North Carolina corporation ("FACTOR").
W I T N E S S E T H:
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WHEREAS, Factor and Client have entered into certain financing
arrangements pursuant to the Factoring Agreement, dated as of July 31, 2000 by
and between Factor and Client (and as amended hereby, and as the same may have
heretofore been or may hereafter be further amended, modified, supplemented,
extended, renewed, restate or replaced, the "FACTORING AGREEMENT," and together
with all agreements, documents and instruments at any time executed and/or
delivered in connection therewith or related thereto, collectively, the
"FACTORING DOCUMENTS"); and
WHEREAS, the circumstances described herein constitute multiple
Events of Default under the Factoring Agreement and the other Factoring
Documents; and
WHEREAS, Client has requested that Factor forbear from exercising its
rights as a result of such Events of Default, which are continuing, and that
Factor provide continue to factor Client's Accounts and provide other financial
accommodations to Client notwithstanding such Events of Default; and
WHEREAS, Factor is willing to agree to forbear from exercising
certain of its rights and remedies and continue to factor Client's Accounts and
provide other financial accommodations to Client for the period and on the terms
and conditions specified herein;
NOW, THEREFORE, in consideration of the foregoing, and the respective
agreements, warranties and covenants contained herein, the parties hereto agree,
covenant and warrant as follows:
SECTION 1. DEFINITIONS
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1.1. INTERPRETATION. All capitalized terms used herein (including
the recitals hereto) shall have the respective meanings assigned thereto in the
Factoring Agreement unless otherwise defined herein.
1.2. ADDITIONAL DEFINITIONS. As used herein, the following terms
shall have the respective meanings given to them below and the Factoring
Agreement is hereby amended to include, in addition and not in limitation, each
of the following definitions:
(a) "EXISTING DEFAULTS" shall mean the failure by Client to
comply with the Tangible Net Worth Covenant and with the Minimum Working Capital
Covenant under the Factoring Agreement, in each case for the period ending
December 31, 2000.
(b) "FORBEARANCE PERIOD" shall have the meaning set forth in
Section 3.2(a) hereof.
SECTION 2. ACKNOWLEDGEMENT
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2.1. ACKNOWLEDGEMENT OF OBLIGATIONS. Client hereby acknowledges,
confirms and agrees that as of the close of business on February 15, 2001,
Client is indebted to Factor in respect of advances and made and letter of
credit obligations incurred, under the Factoring Agreement in the principal
amount of $1,447,126. All Obligations (as more specifically defined in the
Factoring Agreement), together with interest accrued and accruing thereon, and
fees, costs, expenses and other charges now or hereafter payable by Client to
Factor, are unconditionally owing by Client to Factor, without offset, defense
or counterclaim of any kind, nature or description whatsoever.
2.2. ACKNOWLEDGEMENT OF SECURITY INTERESTS. Client hereby
acknowledges, confirms and agrees that Factor has and shall continue to have
valid, enforceable and perfected first-priority liens upon and security
interests in the Collateral heretofore granted to Factor pursuant to the
Factoring Documents or otherwise granted to or held by Factor.
2.3. BINDING EFFECT OF DOCUMENTS. Client hereto acknowledges,
confirms and agrees that: (a) each of the Factoring Documents to which it is a
party has been duly executed and delivered to Factor by Client, and each is in
full force and effect as of the date hereof, (b) the agreements and obligations
of Client contained in such documents and in this Agreement constitute the
legal, valid and binding Obligations of Client, enforceable against it in
accordance with their respective terms, and Client has no valid defense to the
enforcement of such Obligations, and (c) Factor is and shall be entitled to the
rights, remedies and benefits provided for in the Factoring Documents and
applicable law.
SECTION 3. FORBEARANCE IN RESPECT OF CERTAIN EVENTS OF DEFAULT
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3.1. ACKNOWLEDGEMENT OF DEFAULT. Client hereby acknowledges and
agrees that the Existing Defaults have occurred and are continuing, each of
which constitutes an Event of Default and entitles Factor to exercise its rights
and remedies under the Factoring Documents, applicable law or otherwise and
Client further represents and warrants that as of the date hereof no other
Events of Default under the Factoring Documents exist. Factor has not waived,
presently does not intend to waive and may never waive such Existing Defaults
and nothing contained herein or the transactions contemplated hereby shall be
deemed to constitute any such waiver. Client hereby acknowledges and agrees that
Factor has the presently exercisable right to declare the Obligations to be
immediately due and payable under the terms of the Factoring Documents.
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3.2. FORBEARANCE.
(a) In reliance upon the representations, warranties and
covenants of Client contained in this Agreement, and subject to the terms and
conditions of this Agreement and any documents or instruments executed in
connection herewith, Factor agrees to forbear from exercising its rights and
remedies under the Factoring Documents or applicable law in respect of or
arising out of the Existing Defaults, subject to the conditions, amendments and
modifications contained herein for the period (the "FORBEARANCE PERIOD")
commencing on the date hereof and ending on the earlier of: (i) March 23, 2001
or (ii) the occurrence or existence of any Event of Default, other than the
Existing Defaults.
(b) Upon the termination of the Forbearance Period, the
agreement of Factor to forbear shall automatically and without further action
terminate and be of no force and effect, it being expressly agreed that the
effect of such termination will be to permit Factor to exercise such rights and
remedies immediately, including, but not limited to, (i) ceasing to factor any
additional Accounts of Client and (ii) the acceleration of all of the
Obligations; in either case without any further notice, passage of time or
forbearance of any kind.
3.3. NO OTHER WAIVERS; RESERVATION OF RIGHTS.
(a) Factor has not waived, is not by this Agreement waiving,
and has no intentions of waiving, any Events of Default which may be continuing
on the date hereof or any Events of Default which may occur after the date
hereof (whether the same or similar to the Existing Defaults or otherwise), and
Factor has not agreed to forbear with respect to any of its rights or remedies
concerning any Events of Default (other than, during the Forbearance Period, the
Existing Defaults to the extent expressly set forth herein), which may have
occurred or are continuing as of the date hereof which may occur after the date
hereof.
(b) Subject to Section 3.2 above (solely with respect to the
existing Events of Default), Factor reserves the right, in its discretion, to
exercise any or all of its rights and remedies under the Factoring Agreement and
the other Factoring Documents as a result of any Events of Default which may be
continuing on the date hereof or any Event of Default which may occur after the
date hereof, and Factor has not waived any of such rights or remedies, and
nothing in this Agreement, and no delay on its part in exercising any such
rights or remedies, should be construed as a waiver of any such rights or
remedies.
3.4. FEE. In consideration of the agreements set forth herein,
Client shall pay to Factor a fee in the amount of $5,000, which fee shall be
fully earned as of the date hereof and payable contemporaneously with the
execution of this Agreement. Such fee is in addition to all other fees,
interest, costs and expenses payable in connection with the Factoring Documents
and may be charged by Factor to any account of Client maintained by Factor. The
fee shall be fully earned by Factor notwithstanding any failure by Client to
comply with any other term of this Agreement.
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SECTION 4. AMENDMENTS AND SUPPLEMENTARY PROVISIONS [DRAFTING NOTE: THESE
PROVISIONS MUST BE CONFORMED TO THE AGREEMENT AMONG THE
PARTIES]
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4.1. REDUCTION IN ADVANCE RATES. Client acknowledges that certain of
the existing advance rates (defined as 100% minus applicable reserves) under the
Factoring Agreement shall be adjusted as follows:
(a) the advance rate on Eligible Inventory shall be reduced as
follows:
EFFECTIVE DATE ADVANCE RATE
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February 16, 2001 18%
February 23, 2001 16%
March 2, 2001 14%
March 9, 2001 12%
March 16, 2001 10%
(b) effective as of the date of this Agreement, the [L/C]
advance rate shall be 20%.
4.2. INTEREST RATE PROVISIONS. Without in any way limiting the
rights and remedies of Factor set forth in this Agreement or under the other
Factoring Documents, at any time while any of the Existing Defaults is
continuing, or if any other Event of Default occurs (and while the same is
continuing), Factor shall charge interest at the Default Rate with respect to
the outstanding Obligations owing by Client to Factor, as provided in the
Factoring Agreement.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS
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5.1. Each of the representations and warranties made by or on behalf
of client to Factor in any of the Factoring Documents was true and correct when
made and in all material respects is, except for any representation and warranty
set forth in the Factoring Agreement relating to the non-existence of an Event
of Default, true and correct on and as of the date of this Agreement with the
same full force and effect as if each of such representations and warranties had
been made by Client on the date hereof and in this Agreement.
SECTION 6. CONDITIONS TO EFFECTIVENESS OF CERTAIN PROVISIONS OF THIS
AGREEMENT
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6.1. The effectiveness of the terms and provisions of Sections 3.2
of this Agreement shall be subject to the receipt by Factor of each of the
following, in form and substance satisfactory to Factor:
(a) an original of this Agreement, duly authorized, executed
and delivered by Client;
(b) payment of fee payable pursuant to Section 3.4.
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SECTION 7. PROVISIONS OF GENERAL APPLICATION
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7.1. EFFECT OF THIS AGREEMENT. Except as modified pursuant hereto,
no other changes or modifications to the Factoring Documents are intended or
implied and in all other respects the Factoring Documents are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof. To the extent of conflict between the terms of this
Agreement and the other Factoring Documents, the terms of this Agreement shall
control. The Factoring Agreement and this Agreement shall be read and construed
as one agreement.
7.2. COSTS AND EXPENSES. Client absolutely and unconditionally
agrees to pay to the Factor, on demand by the Factor at any time and as often as
the occasion therefor may require, whether or not all or any of the transactions
contemplated by this Agreement are consummated: all fees and disbursements of
any counsel to Factor in connection with the preparation, negotiation, execution
or delivery of this Agreement and any agreements delivered in connection with
the transactions contemplated hereby and expenses which shall at any time be
incurred or sustained by the Factor or any participant of Factor or any of their
respective directors, officers, employees or agents as a consequence of or in
any way in connection with the preparation, negotiation, execution or delivery
of this Agreement and any agreements prepared, negotiated, executed or delivered
in connection with the transactions contemplated hereby.
7.3. FURTHER ASSURANCES. The parties hereto shall execute and
deliver such additional documents and take additional action as may be necessary
or desirable to effectuate the provisions and purposes of this Agreement.
7.4. GOVERNING LAW. This Agreement, which is subject to modification
only in writing, is supplementary to and is to be considered as part of the
Factoring Agreement and shall take effect when accepted and signed by Factor.
This Agreement shall be interpreted according to the laws of the State of
California and shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns. Any notices, demands,
consents[, or] other writings or communications permitted or required by this
Agreement shall be given in the manner and to the address as set forth in the
Factoring Agreement.
7.5. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY
IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
ARISING IN CONTRACT, TORT OR OTHERWISE BETWEEN FACTOR AND CLIENT ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER FACTORING DOCUMENTS
OR THE TRANSACTIONS RELATED THERETO.
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IN WITNESS WHEREOF, this Agreement is executed and delivered as of
the day and year first above written.
AVID SPORTSWEAR, INC.
By: /s/ Xxxxxx Mow
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Name: /s/ Xxxxxx Mow
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Title: /s/ CEO/President
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GE CAPITAL COMMERCIAL SERVICES, INC.
By: /s/ Xxxxx XxXxxxx
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Name: /s/ Xxxxx XxXxxxx
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Title: /s/ Vice-President
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