EXHIBIT 10.2
NationsBank
NationsBanc Commercial Corporation
Factoring Agreement
entered into between
Candie's, Inc.
Bright Star Footwear, Inc.
and
NationsBanc Commercial Corporation
NationsBanc Commercial Corporation
P.O. Box 4095
Atlanta, Georgia 30302
Gentlemen:
We are pleased to confirm the following agreement by which you are to act
as sole factor for sales made by us:
SECTION 1. DEFINITIONS
1.1 "Banking Day" shall mean a day for dealings by and between banks,
excluding Saturday, Sunday and any day which shall be a legal holiday in the
City of Atlanta, Georgia, and any other day on which banking institutions are
authorized to close in the City of Atlanta, Georgia.
1.2 "Credit Risk" shall mean the risk of loss resulting solely and
exclusively from a Customer's failure to pay at maturity because of its
financial inability.
1.3 "Customer Dispute" shall mean any cause for nonpayment of Receivables,
other than the financial inability of the Customer, including, without
limitation, any alleged defense, offset, or counterclaim.
1.4 "Customers" shall mean the account debtors obligated on the
Receivables.
1.5 "Default" shall mean the occurrence of any of the following events: (a)
nonpayment when due of any amount payable on any of the Obligations or failure
to perform any agreement or meet any obligation of ours contained herein or in
any agreement out of which any of the Obligations arose; (b) default by us in
repayment when due of any indebtedness now
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or hereafter owed for monies borrowed from any one other than you; (c) any
material statement, representation, or warranty of ours made orally or in
writing herein or in any other writing or statement at any time furnished or
made by us to you is untrue in any material respect as of the date furnished or
made; (d) suspension of the operation of our present business; (e) any Obligor
becomes insolvent or unable to pay debts as they mature, makes an assignment for
the benefit of creditors, or a proceeding is instituted by or against any
Obligor alleging that such Obligor is insolvent or unable to pay debts as they
mature, or a petition under any provision of Title 11 of the United States Code
(entitled "Bankruptcy"), as amended is brought by or against any Obligor; (f)
dissolution, merger, or consolidation of any Obligor which is a corporation; (g)
sale, transfer or exchange, either directly or indirectly, of a controlling
stock interest of any Obligor which is a corporation; (h) termination or
withdrawal of any guaranty for the Obligations; (i) appointment of a receiver
for any collateral pledged for the Obligations or for any property in which we
have an interest; (j) the Pension Benefit Guaranty Corporation shall commence
proceedings under Section 4042 of the Employee Retirement Income Security Act of
1974 (ERISA) to terminate any employee pension benefit plan of Debtor; or (k)
you in good faith deem the prospect of our payment or performance of the
Obligations to have been impaired.
1.6 "Net Amount" of Receivables shall mean the gross amount of Receivables,
less maximum discounts, less returns, less credits or allowances of any nature
at any time issued, owing, granted or outstanding, and less also your commission
as set forth herein.
1.7 "Obligations" shall mean all of our obligations to you hereunder,
including without limitation all obligations of ours to you under any note,
contract of surety, guaranty, or accommodation, or with respect to letters of
credit or acceptances, sums owing to you for goods and/or services purchased
from any other firm factored or financed by you, and all other obligations of
ours to you, however and whenever created, arising or evidenced, whether direct
or indirect, through assignment from third parties in the ordinary course of
your business, absolute, contingent or otherwise, now or hereafter existing or
due or to become due.
1.8 "Obligor" shall mean: us and each other party primarily or secondarily,
directly or indirectly liable on any of the Obligations.
1.9 "Payment Date" shall mean: (a) for each credit-approved Receivable for
which you retain the Credit Risk, the date on which the Receivable is credited
by you to our account or, if such Receivable is not paid, one hundred twenty
(120) days after the due date of the Receivable or, if such day is not a Banking
Day, the next Banking Day; and (b) for each Receivable for which you do not bear
the Credit Risk, the date on which the Receivable is credited by you to our
account.
1.10 "Receivables" shall mean all accounts, instruments, contract rights,
chattel paper, documents, and general intangibles arising from our Sales which
are specifically assigned by us hereunder, and the proceeds thereof, and all
security and guaranties therefor, whether now existing or hereafter created.
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1.11 "Sales" shall mean the sale of goods and/or the rendition of services
by us in the ordinary course of our business to Customers in the United States
of America and Puerto Rico.
SECTION 2. SALE AND APPROVAL; PURCHASE PRICE; COMMISSION; RESERVE
2.1 We hereby assign and sell to you as absolute owner, without recourse,
except as hereinafter set forth, our entire interest in all of our present and
future Receivables.
2.2 All orders for Sales shall be submitted to you for credit approval
prior to shipment of the goods or rendition of the services so ordered, and each
approved Sale shall be made only in accordance with such approval. You may, in
your sole discretion, approve in writing all or a portion of our customers'
orders, either by establishing a credit line limited to a specific amount for a
specific customer, or by approving all or a portion of the proposed purchase
order submitted by us. Receivables arising from orders not so approved by you,
in whole or in part, shall be with full recourse to us to the extent and in the
respects not so approved. A credit approval shall not be effective if (a) the
approved terms of sale are changed, (b) delivery of the goods to the Customer is
not made by us within forty-five (45) days after the shipping date specified in
our request for credit approval, or if no such date is specified, within
forty-five (45) days of the credit approval, or (c) the invoice representing the
Sale is not delivered to you within twenty (20) days after the shipment date.
While a credit line remains in force, Receivables (or parts thereof) in excess
of such line will succeed amounts within the line which are paid by or credited
to the Customer; the succession of Receivables (or parts thereof) shall take
place in the order of maturity and shall be limited to amounts then so paid or
credited. The right of succession ceases when the line is cancelled. On all
credit-approved Sales you assume the Credit Risk up to the amount so approved
and will bear the credit loss on the amount of the uncollected Receivables if a
Customer, after delivery/rendition and acceptance of the goods/services, fails
on due date to pay in full solely because of financial inability, but you are
not to be responsible where nonpayment results from any Customer Dispute, acts
of God, war, civil strife, currency restrictions, or foreign political
impediments, because we assume all other risks. Credit approvals, once granted,
may be withdrawn by you prior to shipment/rendition of the goods/services. With
regard to Sales without credit approval or in excess of any approved amount of
credit, as to any given Customer, we agree that any payments or credits on any
Receivables owing from such Customer may be applied first to any credit-approved
Receivables which may at any time be unpaid, regardless of the respective dates
such Sales occurred and regardless of any notations on payment items, or may be
applied in such other manner as you in your sole discretion shall deem
appropriate.
If, when we submit to you for your prior written credit approval, the amount,
terms and delivery date of a proposed sale of goods, (i) we advise you in
writing that the order for the goods is a special order by the Customer and (ii)
your credit approval as to such order is withdrawn prior to shipment of the
goods, then (a) to the extent that goods covered by such order consist of work
in process, such work in process shall be finished, and (b) such finished goods
together with all finished goods covered by such order manufactured prior to the
withdrawal of your credit
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approval (collectively the "Finished Goods") shall be promptly resold by us (but
in no event later than sixty (60) days after you withdraw your credit approval),
subject to your prior written approval. You agree to reimburse us for any
out-of-pocket loss we may sustain upon such resale, but only if the Finished
Goods are available for resale within the delivery date specified in the order
relating to the order with respect to which you credit approval has been
withdrawn, free and clear of all liens and charges. "Out of pocket loss" is
herein defined to mean the amount of the original cost of the goods, or portion
thereof, less the amount of the actual resale price of the goods, or portion
thereof, ultimately resold.
2.3 We will provide you with listings of Receivables in form satisfactory
to you, together with Customers' invoices, shipping documents, and such other
documents and proof of delivery/rendition as you may at any time require.
Billing on invoices by whomever done shall be conclusive evidence of assignment
and sale hereunder of such Receivables whether or not we execute any other
instrument with regard thereto. All invoices to Customers shall state plainly on
the face thereof that the Receivables represented by such invoices have been
assigned, sold, and are payable to you only. All remittances obtained by us
against Receivables will be received in trust for you, and will turn over to you
the identical remittances as speedily as possible; provided, however, that
nothing herein authorizes us to collect Receivables.
2.4 The purchase price of Receivables is to be the Net Amount thereof,
which, less any charges and reserves, will be due and payable on Payment Date.
We shall pay you a commission in an amount equal to four tenths of one percent
(.4%) of the gross amount of such Receivables arising from orders approved by
you as to credit; and fifteen hundredths of one percent (.15%) of the gross
amount of Receivables arising from orders not approved by you as to credit which
Receivables we shall assign on separate schedule; provided, however, that the
minimum commissions paid by us each contract year shall be One Hundred Thousand
Dollars ($100,000.00) or a prorated part thereof if this Agreement shall be
terminated during a contract year. You may retain from sums payable to us a
reserve, which reserve may be revised from time to time at your discretion, in
order to provide for Customer Disputes, possible credit losses on unapproved
Receivables, sums owing to you for goods/services purchased by us from any other
firm factored or otherwise financed by you, and the Obligations. A discount,
credit, or allowance after issuance or granting may not be claimed by us, but
may be claimed solely by the Customer; no third party beneficiary rights are
created hereby.
2.5 We shall pay to you on demand any charges for commissions at any time
outstanding in our account.
2.6 You will render a statement of account monthly, and such statement
shall be binding upon us except as to specific matters for which you are
notified in writing to the contrary within one hundred twenty (120) days after
the date of such statement.
SECTION 3. [INTENTIONALLY LEFT BLANK]
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SECTION 4. POWER OF ATTORNEY
We hereby appoint you as our attorney-in-fact to receive, open, and dispose
of all mail addressed to us pertaining to Receivables; to endorse our name upon
any notes, acceptances, checks, drafts, money orders, and other evidences of
payment of Receivables that may come into your possession and to deposit or
otherwise collect the same; and to do all other acts and things necessary to
carry out the terms of this Agreement. This power, being coupled with an
interest, is irrevocable while any Receivable shall remain unpaid. You, as
attorney-in-fact, shall not be liable for any errors of judgment or mistake of
fact.
SECTION 5. SECURITY INTEREST
We hereby grant you a security interest in all of our present and future
accounts, instruments, contract rights, chattel paper, documents and general
intangibles, (whether arising before or after termination of this Agreement) and
all returned, repossessed, and reclaimed goods, and books and records relating
thereto, to secure all of the Obligations. We further sell and assign to you all
our title and/or interest in the goods (unless released by you) represented by
Receivables as well as goods returned by or repossessed from Customers, all of
our rights as an unpaid vendor or lienor, all or our rights of stoppage in
transit, replevin and reclamation relating thereto, and all of our rights
thereto; we will cooperate with you in exercising any rights with respect to the
goods. In addition, we hereby grant you a security interest in the reserve
established pursuant to Section 2.4 hereof, to secure all of the Obligations.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 We represent and warrant that we are fully authorized to enter into
this Agreement and perform hereunder and covenant that we will continue to be so
for the duration of this Agreement.
6.2 We represent and warrant that we are solvent.
6.3 To the best of our knowledge and belief, we represent and warrant that
our Receivables are, and covenant that they shall be, at the time of their
creation, bona fide and existing obligations of our Customers arising out of our
Sales, free and clear of all security interests, liens, and claims whatsoever.
6.4 We represent and warrant that our domestic inventory is not subject to
any security interest, lien or encumbrance whatsoever other than security
interests of creditors with whom you have entered into an intercreditor
agreement in form and substance acceptable to you, and we covenant that we shall
not permit it to become so encumbered without your prior written consent.
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6.5 We represent and warrant with respect to each Receivable as it arises:
(a) We will have made delivery of the goods or will have rendered the
services ordered as per the Customer's deliver order;
(b) We have no reason to believe that any Customer will not accept the
goods and/or services;
(c) We have no reason to believe that any Customer Dispute will exist
in any material respect;
(d) We will have preserved and will continue to preserve any liens and
any rights to liens available by virtue of Sales; and
(e) The Sale will have been made at arms length.
SECTION 7. CUSTOMER DISPUTES, CHARGEBACKS AND RETURNS
With respect to Receivables for which you bear the Credit Risk, we will
notify you promptly and will settle all known Customer Disputes, but you have
the right at all times to do so directly and to compromise, adjust, or litigate
all such Customer Disputes. If a Customer Dispute exists or is asserted with
regard to any Receivable, or if we breach any representation, warranty or
covenant with respect to any Receivable, you may charge back to our account the
disputed amount of such Receivable. You may charge back to our account at any
time any unapproved Receivable, whether before or after its due date. A
chargeback shall not be deemed a reassignment of the Receivable, and title
thereto and to the goods represented thereby shall remain in you until you
execute a reassignment. All returned, replevied, and reclaimed goods coming into
our possession shall be held in trust by us for you.
SECTION 8. INDEMNITY
We shall indemnify you for all losses, costs and expenses incurred by you
in connection with Receivables for which credit approval has not been given and
in connection with Receivables which are unpaid at maturity for reasons other
than financial inability. Further, we shall indemnify you for any liability for
duties, forwarder's fees, storage, shipping charges, sales or excise taxes or
other expenses in connection with the Receivables and for any losses occasioned
by claims of Customers under Receivables. This indemnity shall survive the
termination of this Agreement for sixty (60) days.
SECTION 9. APPLICABLE LAW
This Agreement shall be governed by, construed and enforced according to
the laws of the State of New York.
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SECTION 10. EFFECTIVE DATE; TERMINATION; BINDING EFFECT
If accepted by you, this Agreement shall be effective on the 27th day of
May, 1998, and shall continue in full force and effect until: (a) three (3)
years from such effective date and from year to year thereafter until terminated
by your giving to us not less than sixty (60) days prior written notice; or (b)
terminated by us at any time by giving to you not less than sixty (60) days
prior written notice. This Agreement may be terminated at any time by you
without notice to us should any Default occur or should the Revolving Credit and
Security Agreement between us as Borrower and you as Agent and Lender of even
date herewith terminate for any reason. Upon termination, we will pay all of our
Obligations to you, and in any event we will remain liable to you for any
deficiency remaining after determination of our liability hereunder and
liquidation of any collateral. Also, upon termination you may withhold any
payment to us unless supplied with an indemnity satisfactory to you. This
Agreement shall bind us, our successors and assigns and shall inure to the
benefit of you, your successors and assigns; we agree that you may delegate your
duties hereunder.
SECTION 11. EXPENSES; ATTORNEYS' FEES; NO WAIVER; SEVERABILITY; NOTICES;
HEADINGS
We shall pay all expenses incurred in connection with the filing of
financing statements, continuation statements, and record searches. We shall
also pay you such wire transfer and similar fees as you charge from time to
time. Upon liquidation of any collateral, settlement or prosecution of Customer
Disputes, or enforcement of any obligation of ours hereunder, you may charge to
our account all costs and expenses incurred including fifteen percent (15%) of
the amount involved as attorneys' fees, if collection is by or through an
attorney and such costs, expenses and fees shall constitute obligations
hereunder. No delay or failure on your part in exercising any right, privilege,
or option hereunder shall operate as a waiver of such or of any other right,
privilege, or option, and no waiver, amendment, or modification of any provision
of this Agreement shall be valid, unless in writing signed by you and then only
to the extent therein stated. Should any provision of this Agreement be
prohibited by or invalid under applicable law, the validity of the remaining
provisions shall not be affected thereby. Any notice or request hereunder may be
given to either party at their respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a notice
of change of address under this Section. Any notice or request hereunder shall
be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, (d) telex or telegram, subsequently
confirmed by registered or certified mail, or (e) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with telephone communication to a duly
authorized officer of the recipient confirming its receipt as subsequently
confirmed by registered or certified mail. Any notice or other communication
required or permitted pursuant to this Agreement shall be deemed given (a) when
personally delivered to any officer of the party to whom it is addressed, (b) on
the earlier of actual receipt thereof or three (3) days following posting
thereof by certified or registered mail, postage prepaid, or (c) upon actual
receipt thereof when sent by
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a recognized overnight delivery service or (d) upon actual receipt thereof when
sent by telecopier to the number set forth below with telephone communication
confirming receipt and subsequently confirmed by registered, certified or
overnight mail to the addresses set forth below, in each case addressed to each
party at its address set forth below or at such other address as has been
furnished in writing by a party to the other by like notice:
If to Candie's, Inc.:
Candie's, Inc./Bright Star Footwear, Inc.
2975 Westchester Avenue
Purchase, NY 10577
Attention: David Golden, CFO
Telephone: (914) 694-8600
Telecopier: (914) 694-8609
with a copy to:
Tenzer Greenblatt, LLP
405 Lexington Avenue, 23rd Floor
New York, NY 10174
Attention: Michael Mullman, Esq.
Telephone: (212) 885-5517
Telecopier: (212) 885-8001
If to NationsBanc Commercial Corporation:
NationsBanc Commercial Corporation
P.O. Box 4095
Atlanta, GA 30302
Attention: Robert Higgins, SVP
Telephone: (212) 790-4529
Telecopier: (212) 790-4518
with a copy to:
NationsBanc Commercial Corporation
1372 Broadway
New York, NY 10018
Attention: Legal Department
Telephone: (212) 790-4524
Telecopier: (212) 790-4632
The headings used herein are intended to be for convenience of reference only
and shall not define or limit the scope, extent or intent or otherwise affect
the meaning of any portion hereof.
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SECTION 12. ENTIRE AGREEMENT; WAIVER OF JURY TRIAL
This Agreement embodies our entire agreement as to the subject matter and
supersedes all prior agreements as to the subject matter. EACH OF US HEREBY
WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO
TRANSACTIONS UNDER THIS AGREEMENT.
SECTION 13. TRADE STYLES
Receivables under this Agreement shall include those created by our doing
business under the following trade styles, all of which have been duly and
properly registered:
Candie's; Bongo; Aspen; Crayons; Bright Star
Candie's, Inc.
By: /s/ Gary Klein VP Finance
---------------------------------
(Title)
Bright Star Footwear, Inc.
By: /s/ Gary Klein VP Finance
---------------------------------
(Title)
ACCEPTANCE
The foregoing Factoring Agreement is accepted in Atlanta, Georgia as of the
27th day of May, 1998.
NationsBanc Commercial Corporation
By: /s/ Stuart Brister SVP
---------------------------------
(Title)
Funds Employed
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