September 30, 2004
Majesco Sales, Inc.
000 Xxxxxxx Xxxxxx Xxxxxxx
Xxxxxx, XX 00000
Gentlemen:
Reference is made to the Factoring Agreement entered into between us
dated April 24, 1989, as amended and/or supplemented (the "Factoring
Agreement"). This will confirm that the Factoring Agreement is hereby amended,
effective November 1, 2004, as follows:
1. The following is added at the end of Paragraph 5:
"You warrant that (i) you shall have on the last day of (x) the first
six months of each of your fiscal years and (y) the end of each of your
fiscal years (i) Tangible Net Worth in an amount not less than
$10,000,000 and (ii) your Operating Losses shall not exceed $1,000,000
during any of your fiscal quarters, unless cumulatively for a rolling
12 month period Operating Losses have not exceeded $4 million.
For the purpose hereof the following terms shall have the following
definitions:
"CURRENT ASSETS" at a particular date shall mean your cash accounts
and inventory.
"CURRENT LIABILITIES" at a particular date shall mean all amounts which
would, in conformity with GAAP, be included under current liabilities
or duplications, the amounts of (a) all indebtedness payable on demand,
or at the option of the person or entity to whom such indebtedness is
owed, not more than twelve (12) months after such date, (b) any
payments in respect of any indebtedness (whether installment, serial
maturity, sinking fund payment or otherwise) required to be made not
more than twelve (12) months after such date, (c) all reserves in
respect of liabilities or indebtedness payable on demand or, at the
option of the person or entity to whom such indebtedness is owed, not
more than twelve (12) months after such date, the validity which is not
contested to such date, (d) all accruals for federal or other taxes
measured by income payable within twelve (12) months of such date and
(e) all outstanding indebtedness to us.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect on the date hereof.
"OPERATING LOSSES" shall mean the amount, if any, by which operating
expenses as determined in accordance with GAAP (excluding depreciation
and amortization, nonrecurring expenses, charges related to EITF 00-19,
noncash expenses, interest and finance costs and income taxes) exceed
gross profit as determined in accordance with GAAP.
"TANGIBLE NET WORTH" shall mean, at a particular date (a) the aggregate
amount of all of your assets as may be properly classified as such in
accordance with GAAP consistently applied including prepaid license
fees and development costs, less (b) the aggregate amount of all of
your liabilities (excluding subordinated liabilities to us and the
waarant liability arising out of EITF-0019) determined in accordance
with GAAP.
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2. The following is hereby added as a new Paragraph 6(g) after Paragraph
6(f): "6(g). You shall pay to us a facility fee (the "Facility Fee")
of (i) 0.5% of $30,000,000 (the "Maximum Credit Facility") on
November 1, 2004; and (ii) 0.25% of the Maximum Credit Facility on
each November 1 thereafter.
3. The following is added to the end of Paragraph 7(c): "and in addition
all expenses and costs from time to time hereafter incurred by us
during the course of periodic examinations of your books and records
and operation, not to exceed more than three examinations per calendar
year, unless your are in default under this Agreement in which event no
such limitation shall apply, plus a per diem charge at our then
standard rate per person, per day, for our examiners in the field and
office. Our current standard rate is $850.00 per person, per day."
4. The first sentence of Paragraph 9 is deleted and the following is
substituted in its place and stead: "This Agreement shall commence on
the date hereof, and shall continue until October 31, 2005, and
automatically from year to year thereafter, unless you give us notice
in writing, by registered or certified mail, sixty days prior to the
expiration of the original term of this Agreement (or any renewal term
thereof), of your intention to terminate this Agreement as at the end
of such term, with the understanding that we may terminate this
Agreement at any time upon thirty days notice to you by registered or
certified mail."
Except as hereinabove specifically set forth, the Factoring Agreement
shall continue unmodified.
Very truly yours,
XXXXXXXXX & XXXXXXXXX, INC.
By: /s/ Xxxxx Xxxxxx
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Name: XXXXX XXXXXX
Title: SENIOR EXECUTIVE PRESIDENT
Agreed:
MAJESCO SALES INC.
By: /s/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
Title: President
