Exhibit 10.8
FACTORING
AGREEMENT
MILBERG FACTORS, INC.
99 Park Avenue
New York, NY 10016
Gentlemen:
We propose the following agreement
with you, effective as of July 31, 2005 wherein we agree to retain
you as our sole factor in accordance with the terms, provisions and
conditions as hereinafter stated:
1. The undersigned, hereby sells,
assigns, transfers and sets over to you as absolute owner and you
hereby agree to purchase from the undersigned, without recourse to
the undersigned to the extent expressly set forth below, all
Receivables now or hereafter owned by us which are acceptable to
you. You hereby agree to assume the risk of loss resulting from a
customer’s nonpayment of an approved Receivable due to the
customer’s financial inability at maturity to pay such
Receivable. You shall not be responsible, however, for nonpayment
due to any reason other than such inability to pay. The term
“Receivables” means and includes all accounts, accounts
receivable, notes, bills, acceptances and any and all other forms
of obligations owing to us, whether secured or unsecured, all
proceeds thereof and all of our rights to any merchandise which is
represented thereby (delivered or undelivered), including all of
our rights of stoppage in transit, replevin and reclamation as an
unpaid vendor or lienor. You shall be privileged to enjoy all of
the rights and remedies of the seller of such goods and shall be
and become subrogated to all guaranties, collateral and other
rights possessed by us or due to come into our hands, but you shall
not be liable in any manner for exercising or refusing to exercise
any rights thereby bestowed. From time to time we shall provide you
with schedules describing all Receivables created or acquired by us
and shall execute and deliver to you at your offices in the City of
New York written assignments of such Receivables to you and shall
furnish at the same time copies of customers’ invoices or the
equivalent, together with original shipping or delivery receipts
for all merchandise sold and/or all notes, bills, acceptances or
other evidences of customer indebtedness duly endorsed in blank by
us, and any other information or documents you may call upon us
from time to time to submit, all in form satisfactory to you.
Receivables not approved by you as provided below in whole or in
part (including any Receivables outstanding on the date hereof)
shall bear the factoring charge described below, and are hereby
assigned to you with full recourse to the undersigned to the extent
and in the respects not so approved.
2. The amounts and terms of each
sale to our customers shall be submitted to you for your credit
approval in writing and no sales or deliveries shall be made
without such written approval, which may be withdrawn at any time
before delivery, but in no event shall you have any credit risk on
any Receivable, whether or not approved by you, if the net face
amount of such Receivable is less than $150.00, or the invoice
evidences charges for samples supplied to our customer. Your
factoring charge, due and payable at time of purchase, shall be
fifty-five one hundredths of one percent (0.55%) of the gross
amount of the first $25,000,000 of Receivables factored by you in
any contract year, forty-five one hundredths of one percent (0.45%)
of the next $25,000,000 of Receivables factored by you in any
contract year, and forty one hundredths of one percent (0.40%) of
Receivables factored by you in any contract year in excess of
$50,000,000, in each case, less any trade and cash discounts to
customers (which shall be computed on the shortest terms where
optional terms are given). In the event that the terms of any of
our sales exceeds 60 days, you shall receive as to such sales an
additional ¼ of one percent for each additional 30 days, or
portion thereof, of extended terms or additional dating. In
addition, with prior written notice to us, you may from time to
time impose a surcharge with respect to Receivables from customers
who are debtors-in-possession under the Federal Bankruptcy Code,
other high-risk customers or customers located outside the United
States. The purchase price of Receivables accepted by you is to be
the net face amount thereof less your factoring charge. The term
“net face amount” means the gross amount of
Receivables, less trade and cash discounts to customers (which
shall be computed on the shortest terms where optional terms are
given) and credits and allowances to customers of any nature. After
purchase of Receivables by you, a
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discount, credit or allowance may be claimed
solely by the customer and the customer and the undersigned will
not issue or grant any discounts, credits or allowances to a
customer without your prior consent. At the time of purchase of
Receivables and periodically thereafter, you may in your sole and
absolute discretion make advances to us which, in the aggregate and
at anytime outstanding will not exceed the lesser of (i)
$20,000,000 (the “Maximum Revolving Amount”), or (ii)
ninety percent (90%) of the purchase price, and you will credit to
our account the balance of said purchase price less any monies
remitted, paid or otherwise advanced by you for our account and
less returns, trade and cash discounts, credits or allowances of
any nature at anytime issued, owed, granted or outstanding, upon
the respective collection of such Receivables, after adding thereto
three (3) business days to cover mailing time, delays in
remittances and clearance of checks, or, in the case of approved
Receivables, upon their respective uncollectability because of the
customer’s financial inability at maturity to pay same.
Notwithstanding the foregoing, it is understood that you may, at
our request, from time to time advance a sum that is more or less
than the sum determined by the application of the above percentage
of the purchase price and may, in fact, make advances in excess of
the Maximum Revolving Amount but you are under no obligation to do
so; all advances in excess of the aforesaid percentage, less all
applicable deductions, charges, chargebacks and reserves, and all
advances in excess of the Maximum Revolving Amount, are repayable
on demand. Amounts taken by customers for anticipation shall be
charged to our account by you. The minimum aggregate factoring
charges payable under this Agreement for each contract year hereof
shall be ninety-five thousand dollars ($95,000), which, to the
extent of any deficiency, shall be chargeable to our account with
you on a monthly basis. You shall be entitled to hold all sums and
all property of the undersigned at any time to our credit or in
your possession, or upon or in which you have a lien or security
interest, as security for all of our obligations at any time owing
to you and to each corporation which is at any time your parent,
affiliate, subsidiary or a co-subsidiary of your parent. Such
obligations shall include, without limitation, all obligations to
you hereunder and all obligations for purchases made by the
undersigned from any other client factored or financed by you or by
any such parent, affiliate, subsidiary or co-subsidiary, whether
under this agreement or otherwise, no matter how or when arising
and whether due or to become due, and you shall have the right to
charge to our account the amount of all such obligations and pay
over such amounts to such parent, affiliate, subsidiary or
co-subsidiary. Recourse to security shall not at any time be
required, and we shall at all times remain liable to you and such
parent, affiliate, subsidiary or co-subsidiary on demand for all
loans and advances (including any advances in excess of the net
face amount of Receivables) to or for our account and for all of
our other obligations to you. You may at your option reserve an
amount of past sales (the “Reserve”), and revise said
Reserve from time to time, if in your sole judgment it is necessary
to cover possible returns of merchandise, deductions or other
claims or setoffs made by customers.
3. Subject to the provisions of this
Agreement, upon our request, you shall remit (and at any time in
your sole discretion you may remit) any money standing to our
credit on your books in excess of the Reserve. You may charge to
our account interest on any monies remitted or otherwise advanced
by you or charged to our account hereunder (the
“Advances”) before the collection of Receivables or in
the case of approved Receivables, before their respective
uncollectability because of the customer’s financial
inability at maturity to pay same as above described, at a rate
one-half of one percent (0.50%) per annum above the highest
publicly announced “reference”, “prime” or
“base” interest rate of JPMorgan Chase Bank or The Bank
of New York (the “Prime Rate”), (which is now six and
one-quarter percent (6.25%) per annum) computed on the basis of a
360 day year (the “Effective Rate”); provided, however,
that interest on Advances which are in excess of ninety percent
(90%) of the net face amount of outstanding Receivables purchased
hereunder, less the reserve, disputed accounts and unapproved
Receivables will bear interest at a rate one percent (1%) per annum
in excess of the Effective Rate. Said Effective Rate shall be
increased or decreased effective the first day of the month
following any month in which there is an increase or decrease in
the Prime Rate, such increase or decrease to be in an amount equal
to the increase or decrease in such Prime Rate; provided, however,
that in no event shall such Effective Rate be decreased below the
rate of four percent (4%) per annum. Such interest is due and
payable at the close of each month. You will account to us monthly
and each monthly accounting will be fully binding upon us unless we
give you written notice of exceptions within sixty (60) days from
its date.
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4. We warrant and agree as to each
such Receivable that at the time of the sale or assignment thereof
to you hereunder and at all times thereafter: it will be a bona
fide existing obligation created by the absolute sale and delivery
of merchandise or the rendition of services to customers in the
ordinary course of business and will be paid and performed
according to the terms provided therein; all documents delivered to
you in connection therewith are genuine; it will be enforceable
against all parties thereto without credit, defense, offset or
counterclaim, real or claimed, whether arising out of the
transaction creating such Receivable or otherwise; and it will be
free and clear of liens and encumbrances. We further warrant and
agree as to each such Receivable that at the time of the sale or
assignment thereof to you hereunder we will have good title thereto
and good right to sell, assign, transfer and set over such
Receivable to you. All invoices to customers shall state plainly on
the face thereof that the accounts receivable represented by such
invoices have been assigned and are payable only to you. You may
prepare and mail all customers’ invoices, and billings of
such customers’ invoices by whomsoever done shall constitute
an assignment to you of the Receivables represented thereby whether
or not the undersigned executes any other specific instrument of
assignment. We hereby further warrant and agree that the customer
in each instance has received and will accept the merchandise sold
or the services rendered and the invoice therefor without dispute
or claim in any respect whatsoever, including, without limitation,
disputes as to price, terms or quality and defenses based on force
majeure. We will notify you promptly of and shall at our own cost
and expense settle all disputes and claims and will pay you
promptly the amount of the Receivables affected thereby, as well as
the amount of any unapproved Receivable if unpaid at its due date.
If you so elect you are to have and are hereby granted the right
and option at all times to settle, compromise, adjust or litigate
all disputes or claims directly with the customer or other
complainant upon such terms and conditions as you deem advisable,
and also the right to take possession of and to sell or cause to be
sold without notice any returned merchandise, at such prices, to
such purchasers and upon such terms as you deem advisable, and in
any case to charge the deficiencies, costs and expenses thereof
(including attorneys’ fees) to us. In addition to all other
rights hereunder, you may charge against our account the full net
face amount of any Receivable where there is such dispute, defense,
offset, claim and/or counterclaim (regardless of the extent or
nature thereof or whether arising out of the transaction creating
such Receivable or otherwise) or where the customer fails or
refuses to pay the amount due for any reason other than the
customer’s financial inability at maturity to pay, or if any
unapproved Receivable is unpaid at its due date, but such
chargeback shall not be deemed a re-assignment thereof, and title
to such Receivable shall remain in you until such Receivable is
fully paid, settled or discharged. If monies are due and owing from
a customer for both credit-approved and non credit-approved
Receivables, any payments or recoveries received on such
Receivables will be applied first to any credit-approved
Receivables. We hereby agree to indemnify and hold you harmless
against and in respect of any and all liability, loss or expense
(including attorneys’ fees) arising out of or relating to any
breach of warranty or covenant on our part. Any merchandise which
is returned by customers or otherwise recovered shall be set aside,
marked in your name and held by us as your trustee. We exonerate
you from any liability for any loss, depreciation or other damage
to Receivables unless caused by your willful and malicious act. We
agree to execute such further instruments as may be required or
permitted by any law relating to notices of or affidavits in
connection with assignments of accounts receivable and to cooperate
with you in the filing or recording and renewal thereof. As
additional security for all of our obligations to you, as
hereinabove defined, the undersigned hereby grants you a continuing
security interest in all Accounts, General Intangibles and Contract
Rights (as said terms are defined in Article 9 of the Uniform
Commercial Code) now existing or hereafter acquired by us and all
proceeds thereof. Each sale of Receivables hereunder shall
constitute and be a transaction separate from and independent of
each other, but all such transactions shall be subject to and
governed by each and every of the terms, provisions and conditions
of this agreement. During the term of this agreement we shall not
sell, negotiate, pledge or assign or grant any security interest in
any Receivables, Accounts, General Intangibles, Contract Rights or
inventory to any one other than you without your prior consent, nor
shall we grant or permit to exist without your prior consent any
mortgage, pledge, security interest, encumbrance or lien of any
kind upon any of our property, except liens for taxes not yet due,
liens incidental to our business which were not incurred in
connection with the borrowing of money or obtaining of advances or
credit and which do not in the aggregate materially detract from
the value of our assets or impair the use thereof in the operation
of our business. Without limiting the generality of the foregoing,
during the term of this agreement, we shall not pledge any
equity
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interest held by us in any of our subsidiaries
or permit any of our subsidiaries to pledge any equity interest
held by them in any of our indirect subsidiaries; provided that, we
agree to pledge such equity interests to you, in a manner in form
and substance acceptable to you, upon your request any time during
the term of this agreement. We authorize you to file such financing
statements under the Uniform Commercial Code as you may deem
necessary or advisable to perfect the security interests we have
granted to you under or in connection with this Agreement or
otherwise. We appoint Stephen R. Murphy or any other person whom
you may designate as our attorney with power: to endorse our name
on any checks, notes, acceptances, money orders, drafts or other
forms of payment or security that may come in your possession; to
sign our name on any invoice or bill of lading relating to any
Receivable, on drafts against customers, on schedules of assignment
of Receivables, on notices of assignment and public records, on
verification of accounts and on notice to customers; to notify the
post office authorities to change the address for delivery of our
mail to an address designated by you; to receive, open and dispose
of all mail addressed to us; to send requests for verification of
accounts to customers; and to do all other things you deem
necessary to carry out this Agreement. We hereby ratify and approve
all acts of the attorney and neither you nor the attorney will be
liable for any acts of commission or omission, nor for any error of
judgment or mistake of fact or law. This power, being coupled with
an interest, is irrevocable so long as any Receivable sold to you
remains unpaid or any money remains due to you from us. We shall
immediately place notations upon our books of account to disclose
the assignment of all Receivables, accounts, general intangibles
and contract rights to you.
Notwithstanding anything to the c
