BNY FINANCIAL CORPORATION
SECOND AMENDED AND RESTATED
FACTORING AGREEMENT
March 12, 1999
SIGNAL APPAREL COMPANY, INC.
200-A Manufacturers Road
Chattanooga, Tennessee 37405
We are pleased that you have chosen us to act as your sole factor,
effective as of May 23, 1991 (the "Effective Date"). We are also pleased that
you have entered into a Revolving Credit, Term Loan and Security Agreement with
us as Agent ("Agent") for certain lenders ("Lenders") parties thereto from time
to time dated March 12, 1999 (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), pursuant to which
Credit Agreement Lenders shall make loans and Advances to you subject to the
terms and provisions thereof. Capitalized terms used and not otherwise defined
herein, shall have their respective meanings as set forth in the Credit
Agreement.
This agreement states the terms and conditions upon which we shall act as
your sole factor.
1. COVERED SALES; SECURITY INTEREST
(a) You hereby assign and sell to us, as absolute owner, and we hereby
purchase from you, all Receivables, created on, prior to, on, or after the
Effective Date, which arise from your sale of merchandise or rendition of
services. Our purchase of and acquisition of title to each Receivable will be
effective as of the date of its creation and will be entered on our books when
you furnish us with a copy of the respective invoice.
(b) You hereby grant to us a continuing security interest in all of your
present and future Receivables as security for all Obligations.
2. CUSTOMER CREDIT APPROVAL
You shall submit to us the principal terms of each of your customers'
orders for our written credit approval. We may, in our discretion, approve in
writing all or a portion of your 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 a proposed purchase order submitted by you. No
credit approval shall be effective (a) unless in writing; (b) unless the goods
are shipped or the services rendered within the time specified in our written
credit approval or within forty-five (45) days after
the approval is given, if no time is specified; and (c) unless the assignment of
the invoice evidencing the applicable Receivable is received by us within five
(5) business days from the date of such invoice. Upon the earlier to occur of
(i) the customer has accepted delivery of the goods or performance of the
services or (ii) the goods have been deposited by you with a common carrier for
delivery to such customer on "f.o.b. point of origin" terms, we shall then have
the Credit Risk (but not the risk of non-payment for any other reason), to the
extent of the dollar amount specified in the credit approval, on all Receivables
evidenced by invoices which arise from orders approved by us in writing except
for those Receivables evidenced by invoices less than $150.00 and invoices
evidencing charges for samples supplied to your customers. We shall have neither
the Credit Risk nor the risk of non-payment for any other reason on Receivables
arising from orders not approved by us in writing. We may withdraw our credit
approval or withdraw or adjust a credit line at any time before the earlier to
occur of (a) your delivery of deposit of the goods with a common carrier on
"f.o.b. point of origin", as contemplated above, or (b) rendition of the
services, as the case may be.
3. PURCHASE PRICE OF RECEIVABLES
The purchase price of Receivables is the net face amount thereof less our
commission. The term "net face amount" means the gross face amount of the
invoice, less returns, discounts (which shall be determined by us where optional
terms are given), anticipation reductions or any other unilateral deductions
taken by customers, and credits, and allowances to customers of any nature.
Subject to the Assignment of Factoring Proceeds dated the date hereof among us,
Agent and you, the purchase price will be credited to your account on the
Settlement Date (as hereinafter described). The Settlement Date for each
Receivable on which we have the Credit Risk and which is not due from a
department or chain store shall be four (4) business days after the day on which
the Receivable is actually collected by us or becomes one hundred twenty (120)
days past due, whichever is earlier. The Settlement Date on all other
Receivables shall be four (4) business days after the day on which the
Receivable is actually collected by us. We may deduct, from the amount payable
to you on any Settlement Date, Reserves for all Obligations then chargeable to
your account and Obligations which, in our sole judgment, may be chargeable to
your account thereafter.
4. ADVANCES; INTEREST; COMMISSIONS; LATE PAYMENT CHARGES
(a) All advances made to you in respect of the Receivables shall be made
solely by the Lenders under and subject to the terms and conditions of the
Credit Agreement.
(b) For our services under this agreement, we shall charge to your account:
(i) Monthly, as of the 15th day of each month, a commission at the
rate of six tenths of one percent (0.6%) of the gross face amount of each
invoice evidencing a Receivable
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purchased hereunder during such month on terms not exceeding sixty (60)
days (including dating), plus an additional one-quarter of one percent
(.25%) for each additional thirty (30) days beyond the sixty (60) day
period or portion thereof of selling terms. Our commission on any invoice
evidencing a Receivable purchased hereunder shall not be less than $5.00;
except that, if such invoice is electronically transmitted to us on a
transmission system acceptable to us, then our commission for such invoice
shall not be less than $2.00.
(ii) For each Contract Year, you shall be obligated to sell and assign
to us a minimum aggregate amount of Receivables ("Minimum") in each
Contract Year during which this agreement is in effect, or the part of the
last Contract Year during which this agreement is in effect if it is
terminated before the end of a Contract Year ("Partial Last Year"). The
minimum shall be (1) for the first Contract Year, $100,000,000; (2) for the
second Contract Year, $115,000,000, (3) for the third Contract Year,
$130,000,000 (4) for the fourth Contract Year, $145,000,000 and (5) for the
fifth Contract Year, or any Contract Year thereafter or any Partial Last
Year, $160,000,000. If the aggregate amount of Receivables which you
actually sell and assign to us in any Contract Year or in any Partial Last
Year ("Volume") is less than the Minimum, we shall charge to your account
the difference between the commission on the Minimum and the commission on
the Volume for that Contract Year or Partial Last Year ("Minimum Volume
Charge"). We shall compute the Minimum Volume Charge, if any, on a
quarterly basis and charge your account therefor for each quarter in the
month following the end of such quarter, or in the month following the
effective date of termination of this agreement in the case of a Partial
Last Year. If you do not meet the Minimum Volume with respect to any
particular quarter within a Contract Year and you therefore pay to us a
Minimum Volume Charge for such particular quarter, and in any subsequent
quarter in the same Contract Year, your Minimum Volume for which
commissions have been paid by you to us under this agreement then exceeds
the Minimum applicable to such subsequent quarter, by reason of such
Minimum Volume Charge previously paid, you shall then be entitled to
receive a rebate from us to your account, to the extent of the lesser of
such excess or the Minimum Volume Charges previously paid to us in any such
prior quarter of the same Contract Year. Similarly, if for any quarter
within a particular Contract Year, the commissions paid to us under this
agreement exceed the Minimum applicable to such quarter, and in any
subsequent quarter period we otherwise would have been entitled to receive
and you would have been responsible for paying to us any Minimum Volume
Charge applicable to such subsequent quarter, in calculating the amount of
such Minimum Volume Charge payable in such subsequent quarter period you
shall be entitled to a credit against the same to the extent of the lesser
of such excess or the Minimum Volume Charge that would otherwise then have
been due from you to us in relation to such subsequent calendar quarter
within the same Contract Year. However, if (a) you terminate this agreement
prior to the last day of the fifth or any subsequent Contract Year, or (b)
an Event of Default occurs, and if we so elect, and whether or not we then
or thereafter exercise any of our rights of termination hereunder
(including but not limited to our rights under Paragraph 9(a)(ii)), we may
on or at any time after any such termination by you, or the occurrence of
such Event of Default compute the Minimum Volume Charge for the period
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starting on such occurrence and ending on the next date as of which you may
terminate this agreement under Paragraph 9(a)(i) ("Early Termination
Minimum Volume Charge") and charge your account an amount equal to fifty
percent (50%) of such Early Termination Minimum Volume Charge. For the
purpose only of computing such Early Termination Minimum Volume Charge, we
may assume that your Volume for the period will be zero, subject, of
course, to subsequent adjustment if such Volume in fact is more than zero.
(iii) Customer late payment charges (computed at the Revolving
Interest Rate applicable to Domestic Rate Loans), but only if the charge
exceeds Five Dollars ($5.00) and the payment is three (3) business days or
more past due, provided, however, that any such customer late payment
charge shall not be charged with respect to any Receivable for more than
one hundred twenty (120) days.
(iv) All bank charges for wire transfers.
5. MATURED FUNDS
On the last day of each month, we shall credit your account with interest
at the Matured Funds Rate in effect during such month on the average daily
balance during such month of any amounts payable by us to you hereunder (as
confirmed by us by appropriate credit to your account with us) which are not
drawn by you or applied by us on the Settlement Date, while held by us after the
Settlement Date.
6. CHARGES; BALANCES; RESERVES
We may charge to your account all Obligations. Unless otherwise specified
in this agreement or in the Credit Agreement, all Obligations, including any
debit balance in your account, shall be payable on demand. Recourse to security
will not be required at any time. All credit balances or other sums at any time
standing to your credit and all Reserves on our books, and all of your property
in our possession at any time on or in which we have a lien or security
interest, may be held and reserved by us as security for all Obligations. We
will account to you monthly and each monthly accounting statement will be fully
binding on you and will constitute an account stated, unless, within thirty (30)
days after such statement is mailed to you or within thirty (30) days after the
mailing of any adjustment thereof we may make, you give us specific written
notice of exceptions.
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7. REPRESENTATIONS AND WARRANTIES; DISPUTES; RETURNS; CHARGEBACKS;
SUPPLEMENTAL FACTOR
(a) You warrant and represent that you have good title to the Receivables
free of any encumbrance except for Permitted Encumbrances; each Receivable
purchased hereunder is a bona fide, enforceable obligation created by the
absolute sale and delivery of goods or the rendition of services in the ordinary
course of business; your customer is unconditionally obligated to pay at
maturity the full amount of each Receivable purchased hereunder without defense,
counterclaim or offset, real or alleged; all documents in connection therewith
are genuine; and, to the best of your knowledge, the customer will accept the
goods or services without alleging any Dispute.
(b) You further represent and warrant that (i) your address set forth above
is that of your chief place of business and chief executive office and the
location of all Collateral and of your books and records relating to the
Receivables; (ii) by a separate writing you have disclosed to us the locations
of all of your other places of business as well as all trade names or styles,
trademarks, divisions or other names under which you conduct business
(hereinafter collectively defined as, "Trade Names"); and (iii) except after
thirty (30) days prior written notice to us of your intention to do so, you will
not make any change in your name or corporate structure (whether by merger,
reorganization or otherwise) nor make any other change which would have the
effect of rendering inaccurate or incomplete the representations contained in
this subparagraph (b).
(c) You shall promptly provide us with duplicate originals of all credits
which you issue to your customers and immediately notify us of any merchandise
returns or Disputes. You will settle all Disputes at no cost or expense to us;
our practice is to allow you a reasonable time to do so. If you so request,
provided no Event of Default has occurred and is continuing, you may enforce
your rights against any of your customers on any Receivable which is subject to
a Dispute if we have charged your account for such Receivable. We will
reasonably cooperate with you in such enforcement, but at your sole cost and
expenses. Should we so elect, we may at any time in our sole discretion (i)
withdraw your authority to issue credits to your customers without our prior
written consent; (ii) litigate Disputes or settle them directly with the
customers on terms acceptable to us; or (iii) direct you to set aside, identify
as our property and procure insurance satisfactory to us on any Retained Goods.
All Retained Goods (and the proceeds thereof) shall be (A) held by you in trust
for us as our property; and (B) subject to a security interest in our favor as
security for the Obligations; and (C) disposed of only in accordance with our
express written instructions.
(d) Our Credit Risk, if any, on a Receivable shall immediately terminate
without any action on our part in the event that (i) your customer asserts a
Dispute (regardless of merit) as a ground for non-payment of the Receivable or
returns or attempts to return the goods represented thereby; or (ii) any
warranty as to the Receivable is breached. We may charge to your account at any
time the gross face amount of any Receivable purchased hereunder (or portion
thereof) on which we
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do not then have the Credit Risk, together with interest thereon at the
Revolving Advance Rate from the due date of such Receivable to the date of
chargeback; such action on our part shall not be deemed a reassignment of such
Receivable and will not impair our rights thereto or security interest therein,
which will continue to be effective until all Obligations are fully satisfied.
(e) YOU WARRANT THAT YOU WILL NOT GRANT A SECURITY INTEREST IN ANY OF YOUR
RECEIVABLES OR IN ANY OF YOUR INVENTORY TO ANYONE EXCEPT US WITHOUT OUR PRIOR
WRITTEN CONSENT.
8. INVOICING; PAYMENTS; RETURNS
(a) Each of your invoices and all copies thereof shall bear a notice (in
form satisfactory to us) that it is owned by and payable directly and only to us
at locations designated by us, and you shall furnish us with duplicate originals
of your invoices accompanied by a confirmatory assignment thereof. Your failure
to furnish such specific assignments shall not diminish our rights. You shall
procure and hold in trust for us and furnish to us at our request satisfactory
evidence of each shipment and delivery or rendition of services. Each invoice
shall bear the terms stated on the customer's order, as submitted to us, whether
or not the order has been approved by us, and no change from the original terms
of the order shall be made without our prior written consent. Any such change
not so approved by us shall automatically terminate our Credit Risk, if any, on
the Receivable arising from your performance of the order. You will hold in
trust for us and deliver to us any payments received from your customers in the
form received, and hereby irrevocably authorize us to endorse your name on all
checks and other forms of payment. Each payment made by a customer shall first
be applied to Receivables from that customer, if any, on which we have the
Credit Risk, and the balance, if any, of such payment shall be applied to other
Receivables due from such customer. You understand that we shall not be liable
for any selling expenses, orders, purchases, contracts or taxes of any kind
resulting from any of your transactions, and you agree to indemnify us and hold
us harmless with respect thereto, which indemnity shall survive termination of
this agreement.
9. TERMINATION
(a) This agreement shall remain in full force and effect until the
expiration of the Term, unless sooner terminated as set forth below.
(i) You may terminate this agreement at any time upon ninety (90) days
prior written notice to us provided that you simultaneously terminate the
Credit Agreement and provided you make payment in full of the Obligations,
including, without limitation, the Minimum Volume Charges described in
Paragraph 4(b)(ii) above; or
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(ii) Should any Event of Default occur, or should the Credit Agreement
be terminated for any reason, or should the Term of and as defined in the
Credit Agreement expire, then in any of such events, we may terminate this
agreement at any time and without notice.
(b) Except as otherwise provided in the Credit Agreement, on the effective
date of termination of this agreement, all Obligations shall become immediately
due and payable in full without further notice or demand. Our rights with
respect to Obligations owing to us, or chargeable to your account, arising out
of transactions having their inception prior to the effective date of
termination, will not be affected by termination. Without limiting the
foregoing, all of our security interests and other rights in and to all
Collateral shall continue to be operative until such Obligations have been fully
and finally satisfied or you have given us an indemnity satisfactory to us.
10. DEFINITIONS
As used herein:
"Contract Year" shall mean the period of twelve (12) consecutive calendar
months commencing on March 12, 1999 and each successive period of twelve (12)
consecutive calendar months thereafter.
"Credit Agreement" shall have the meaning set forth in the introductory
paragraph of this agreement.
"Credit Risk" shall mean the risk of loss resulting solely and exclusively
from the financial inability of your customer to pay at maturity a Receivable
purchased hereunder.
"Dispute" shall mean any cause for nonpayment of Receivables, including,
without limitation, any alleged defense, counterclaim, offset, dispute or other
claim whether arising from or relating to the sale of goods or rendition of
services or arising from or relating to any other transaction or occurrence,
except for financial inability of your customer to pay a Receivable at maturity.
"Effective Date" shall mean the date set forth in the introductory
paragraph hereto.
"Matured Funds Rate" shall mean the rate of interest, announced by us from
time to time, as the rate applicable to matured funds, such rate to be adjusted
automatically on the effective date of any change in such rate as announced by
us.
"Minimum" shall have the meaning set forth in Paragraph 4(b)(ii) hereof.
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"Minimum Volume Charge" shall have the meaning set forth in Paragraph
4(b)(ii) hereof.
"net face amount" shall have the meaning set forth in Paragraph 3 hereof.
"Obligations" means all amounts of any nature whatsoever, direct or
indirect, absolute or contingent, due or to become due, arising or incurred
heretofore or hereafter, arising under this agreement or by operation of law,
now or hereafter owing by you to us Without limiting the foregoing, Obligations
shall include the amounts of all advances, loans, interest, commission, customer
late payment charges and bank related charges, costs, fees, expenses, taxes and
all Receivables charged or chargeable to your account hereunder.
"Partial Last Year" shall have the meaning set forth in Paragraph 4(b)(ii)
hereof.
"Receivables" shall mean and include all of your accounts, contract rights,
instruments, documents, chattel paper, general intangibles relating to accounts,
drafts and acceptances, and all other forms of obligations owing to you arising
out of or in connection with the sale or lease of Inventory or the rendition of
services, all guarantees and other security therefor, whether secured or
unsecured, now existing or hereafter created, and whether or not specifically
sold or assigned to us hereunder, and the right to use the Trade Names in
connection with our rights with respect to goods, the sale of which gave rise to
accounts.
"Reports" shall have the meaning set forth in Paragraph 12(c) hereof.
"Retained Goods" shall mean returned or repossessed merchandise or other
goods which by sale resulted in Receivables theretofore assigned to us.
"Settlement Date" shall have the meaning set forth in paragraph 3 hereof.
"Term" shall mean the Effective Date through March 12, 2004, and each
renewal year thereafter, subject to acceleration upon the occurrence of an Event
of Default or other termination hereunder.
"Trade Names" shall have the meaning set forth in paragraph 7(b) hereof.
"Volume" shall have the meaning set forth in Paragraph 4(b)(iii) hereof.
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11. PLACE OF PAYMENT; NEW YORK LAW AND COURT
(a) All Obligations shall be paid at our office in New York, New York.
(b) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS
OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS RULES).
ALL TERMS USED HEREIN, UNLESS OTHERWISE DEFINED HEREIN, SHALL HAVE THE MEANINGS
GIVEN IN THE NEW YORK UNIFORM COMMERCIAL CODE.
(c) EACH OF US AGREES THAT ALL ACTIONS AND PROCEEDINGS RELATING DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR ANY OTHER OBLIGATIONS
SHALL BE LITIGATED IN ANY FEDERAL OR STATE COURT OF NEW YORK OR, AT OUR OPTION,
IN ANY OTHER COURTS LOCATED ELSEWHERE AS WE MAY SELECT AND THAT SUCH COURTS ARE
CONVENIENT FORUMS AND YOU SUBMIT TO THE PERSONAL JURISDICTION OF SUCH COURTS.
YOU HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT OR OTHER PROCESS OR
PAPERS TO BE ISSUED THEREIN AND HEREBY AGREE THAT SERVICE OF SUCH SUMMONS,
COMPLAINT, PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO YOU AT THE ADDRESS APPEARING HEREIN.
12. ASSURANCES; WAIVERS; REMEDIES; ETC.
(a) Our rights and remedies under this agreement will be cumulative and not
exclusive of any other right or remedy we may have hereunder, under the Credit
Agreement or under the Uniform Commercial Code or otherwise. Without limiting
the foregoing, if we exercise our rights as a secured party we may, at any time
or times, without demand, advertisement or notice, all of which you hereby
waive, sell the Collateral, or any part of it, at public or private sale, for
cash, upon credit, or otherwise, at our sole option and discretion, and we may
bid or become purchaser at any such sale, free of any right of redemption which
you hereby waive. After application of all Collateral to your Obligations as
provided in the Credit Agreement, you shall remain liable to us for any
deficiency.
(b) Failure by us to exercise any right, remedy or option under this
agreement or delay by us in exercising the same will not operate as a waiver; no
waiver by us will be effective unless we confirm it in writing and then only to
the extent specifically stated.
(c) We may charge to your account, when incurred by us, the amount of legal
fees (including fees, expenses and costs payable or allocable to attorneys
retained or employed by
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us) and other costs, fees and expenses incurred by us in connection with this
agreement or any amendments or supplements thereof, or in enforcing our rights
hereunder or in connection with the litigation of any controversy arising out of
this agreement, or in protecting, preserving or perfecting our interest in, any
Collateral, including without limitation all taxes assessed or payable with
respect to any Collateral, and the costs of all public record filings,
appraisals and searches relating to any Collateral. We may also charge to your
account our then standard price for furnishing to you or your designees copies
of any statements, records, files or other data (collectively "Reports")
requested by you or them other than Reports of the kind furnished to you and our
other clients on a regular, periodic basis in the ordinary course of our
business. We may file Financing Statements under the Uniform Commercial Code
without your signature or, if we so elect, sign and file them as your agent.
(d) We shall have no liability hereunder (i) for any losses or damages
(including indirect, special or consequential damages) resulting from our
refusal to assume, or delay in assuming, the Credit Risk, or any malfunction,
failure or interruption of communication facilities, or labor difficulties, or
other causes beyond our control; or (ii) for indirect, special or consequential
damages arising from accounting errors with respect to your account with us. Our
liability for any default by us hereunder shall be limited to a refund to you of
any commission paid by you during the period starting on the occurrence of the
default and ending when it is cured or waived, or when this agreement is
terminated, whichever is earlier.
(e) This agreement cannot be changed or terminated orally and is for the
benefit of and binding upon the parties and their respective successors and
assigns except that you may not assign or transfer any of your rights or
obligations under this agreement without our prior written consent, and no such
assignment or transfer of any such obligation shall relieve you thereof unless
we have consented to such release in writing specifically referring to the
obligation from which you are to be released. This agreement, and any concurrent
or subsequent written supplements thereto or amendments thereof signed by both
of us, represent our entire understanding and supersede all inconsistent
agreements and communications, written or oral, between your and our officers,
employees, agents and other representatives.
(f) This agreement shall not be effective unless signed by you below, and
signed by us at the place for our acceptance.
(g) EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO
THIS
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AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(h) This agreement amends, restates, replaces and supersedes in its
entirety, without a break in continuity, that certain Amended and Restated
Factoring Agreement between us dated as of October 31, 1997, as heretofore
amended, restated, renewed, extended, supplemented, replaced, substituted or
otherwise modified.
Very truly yours,
BNY FINANCIAL CORPORATION
By: /s/ Joseph Grimaldi
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Title: President
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AGREED TO on this 12th day of March, 1999.
SIGNAL APPAREL COMPANY, INC.
By: /s/ Howard Weinberg
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Title: Chief Financial Officer
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