EXHIBIT 10.30

 
FACTORING AGREEMENT
ROSENTHAL & ROSENTHAL, INC.
1370 Broadway
New York NY 10018

New York, NY, September 29, 2010
WILLIAM RAST SOURCING, LLC
1212 Flower St., 5Th Fl.
Los Angeles, CA  90015

The following is the Agreement under which we are to act as your sole
factor.  Capitalized terms shall have the meanings set forth in Section 14
hereof:

1.
Sales and Assignment:

You hereby sell and assign to us, making us absolute owner thereof, all of your
Receivables (except for COD, Credit Card and Prepay accounts), and we shall have
the right to collect and otherwise deal therewith as the sole and exclusive
owner thereof. Upon each sale of your Inventory or rendition by you of services,
you shall execute and deliver to us such further and confirmatory assignments of
your Receivables as we require, in form and manner satisfactory to us, together
with copies of invoices or such equivalent electronic document as we may
designate for such use, and all shipping or delivery receipts and such other
proof of sale and delivery or performance as we, from time to time, may
require.  All invoices (and other statements to Customers) evidencing
Receivables shall clearly state, in a manner satisfactory to us, that each
Receivable has been sold and assigned to and is payable only to us.

2.
Credit and Approval:

You will submit to us for our credit approval the principal terms of each and
every Order.  We may, in our sole discretion, approve all or a portion of an
Order, by issuing a Credit Approval, withdraw any Credit Approval, withdraw or
adjust any Credit Line, or suspend any Availability under a Credit Line, at any
time before you deliver the Inventory or render the services.  In addition, we
may from time to time establish a Credit Line or Credit Lines pursuant to which
you may ship to Customers. No Credit Approval, including approval based upon
shipment against Availability under a Credit Line shall be effective unless (i)
the Inventory is shipped or the services rendered, within the time specified
therein, or if no time is specified, within thirty (30) days after the date our
Credit Approval is issued or if the Credit Approval specifies an outside date
for delivery or shipment, by such delivery or shipment date; (ii) the Customer
has accepted delivery of the Inventory or performance of the services; and (iii)
a confirmatory assignment of the Receivables(s) which arise as a result of the
Order which is the subject of the Credit Approval has been delivered to us,
within ten (10) days of the delivery of the goods or the performance of the
service.  Upon the effectiveness of a Credit Approval, we shall be deemed to
have accepted the Credit Risk to the extent of the dollar amount specified in
the Credit Approval and the Receivable which is the subject thereof shall, to
the extent of the amount specified in the Credit approval, be a Credit Approved
Receivable.  In no event, however, shall we have any Credit Risk on (i) the
first $500 owing, at any time, from any Customer, or (ii) any Receivable for
freight, samples, or sales not made in the ordinary course of your business.  We
may, in our sole discretion, withdraw any Credit Approval, or withdraw or adjust
any Credit Line, at any time before you deliver the Inventory or render the
services.

3.
Client Risk Receivables:

All CR Receivables are with full recourse to you and at your credit risk, but
are otherwise subject to the covenants, terms and conditions provided herein
with respect to Credit Approved Receivables.  We shall have the right to charge
back to your account the amount of CR Receivables at any time either before or
after their maturity and you agree to pay us upon demand the amount thereof,
together with all expenses including collection charges and attorneys’ fees
incurred by us in attempting to collect or

 
 

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enforce any such payment.  In addition, if we, at your request, and in our
discretion, file a proof of claim in any insolvency proceeding with respect to a
CR Receivable and/or forward a CR Receivable to an attorney or agency for
collection, we shall charge your account with (i) the fees and expenses of such
attorney or collection agency and (ii) a service charge equal to $100 plus 5% of
any amount collected on the CR Receivable.

4.
Returned Merchandise/Claims, Disputes and Chargebacks:

In the event of a breach of any of the representations or warranties contained
herein with respect to a Receivable, or the assertion, with respect to a
Receivable, of a Dispute, or the payment of all or part of a Receivable by the
Customer obligated thereon, to a Person other than us, and any such Receivable
(whether or not a Credit Approved Receivable) shall thereupon become a CR
Receivable.  You shall notify us immediately of any Dispute, including, a
Customer’s return of or desire to return any Inventory purchased from you.  We
may, but are not obligated, to settle, compromise, adjust or litigate any
Dispute, including, a return of the related Inventory upon such terms as we deem
advisable.  We may, at our option, charge back to you all amounts owing on CR
Receivables which are not paid when due.  We shall have the right to charge back
to you the amount of any payment which we receive with respect to a CR
Receivable, if we are subsequently required to disgorge such payment for any
reason, including, such payment being deemed a preferential transfer.  A
chargeback shall not constitute a resale or reassignment to you of the
Receivable which is the subject thereof.  You agree to indemnify and save us
harmless from and against any and all loss, liability, claim, cost and expense
of any kind, caused by or arising from any Disputes with or claims of your
Customers or any Person or representative thereof, asserting an interest in
Receivables or payments thereon, including:  (i) any disputes or claims with
respect to terms, price, quality or otherwise with respect to Receivables; (ii)
any claim for a return of any payments with respect to Receivables (including
alleged preferential transfers with respect to payments on Receivables that were
not Credit Approved Receivables at the time the payment was received); (iii) any
claims by any governmental authorities (federal, state, municipal or otherwise)
for the turnover or payment to such governmental authority of all or any portion
of any payment received from a Customer which we paid to you and (iv) all
collection expenses and attorney’s (whether in-house or outside) fees incurred
with respect to any of the foregoing.  Your liability under this paragraph, and
that of any Person liable for the Obligations, shall constitute Obligations but
shall nonetheless be independent hereof and continue notwithstanding any
termination hereof.

5.
Representations, Warranties and Covenants:

You represent, warrant and covenant that:

5.1. you are fully authorized to enter into this Agreement and perform hereunder
and you will continue to be so authorized for the duration of this Agreement.
 
5.2. you are solvent.
 
5.3. the Receivables are, and shall be, at the time of their creation, bona
fide, existing and enforceable obligations of Customers arising out of sales
made or services rendered by you, free and clear of all security interests,
liens, claims and Disputes whatsoever other than Permitted Liens and in the
event that any such Receivables arise from the sale of good, such goods meet all
standards imposed by any governmental agency or authority.
 
5.4. the Inventory is not subject to any security interest, lien or encumbrance
whatsoever, other than Permitted Liens, and you covenant that (i) you shall not
permit the Inventory to become so encumbered without our prior written consent;
and (ii) the Inventory meets all standards imposed by any governmental agency or
authority.
 
5.5. with respect to each Receivable as it arises: (i) you will have delivered
the Inventory or rendered the services pursuant to the Order; (ii) the Customer
will accept the Inventory and/or services without any offset or counterclaim;
(iii) no known Dispute will exist in any respect; (iv) you will have preserved,
and will continue to preserve, any liens and any other rights available to us by
virtue of this Agreement; and (v) the Customer will not be your Affiliate.
 
 

 
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5.6. you will within ten days of our request therefor, provide us with copies of
invoices and shipping or delivery receipts or such equivalent electronic
documents as we may designate or other proof of sale and delivery or performance
as we may from time to time require.
 
5.7. you will not, without providing us with thirty (30) days prior written
notice thereof, change your name, your state of organization or your principal
place of business and you are not aware, and will upon your becoming aware,
notify us promptly, of any Person organizing under your name in another state.
 
5.8. you do not transact business under any trade names or tradestyles except as
set forth on an Exhibit annexed hereto and with respect to any such tradename or
tradestyles you have (i) caused the same to be registered in accordance with the
laws applicable to the use of such tradenames or tradestyles and have not in any
way assigned or encumbered your interest in such tradenames or tradestyles,
except to the extent of Permitted Liens; or (ii) obtained a license to use such
tradenames (other than the license agreement entered into between William Rast
Sourcing, LLC and William Rast Licensing, LLC) or tradestyles from the owner
thereof with respect to the goods or services sold by you under such tradenames
or tradestyles, and in the markets in which such goods or services are sold by
you; and you are not aware, and will upon your becoming aware, promptly notify
us, of any other Person using your name or any of your tradenames or tradestyles
in any similar line of business.
 
5.9. you are, and at all times during the term of this Agreement, shall be, duly
organized, existing and in good standing under the laws of the state of your
organization; and you are, and at all times during the term of this Agreement,
shall be, duly qualified, existing and in good standing in every state in which
the nature of your business requires you to be so qualified.
 
5.10. to the extent that any advances requested by you under this Agreement
shall be used for paying wages of your employees, you shall withhold and pay
over to the applicable tax authorities any amounts thereof as it shall be so
required by applicable law.
 

6.
Commissions and charges:

6.1. For our services hereunder, we shall receive a factoring commission
(hereinafter referred to as the “Base Commission”) of (i) 0.75% of the gross
invoice amount of each Receivable; plus (ii) on those Receivables due from a
Customer (or any Affiliates or subsidiaries of such Customer) listed on the
Special Accounts Schedule submitted herewith and/or from time to time hereafter,
such percentage of the gross invoice amount thereof as equals the surcharge set
forth on the Special Accounts Schedule, to the extent of the amount credit
approved.  All commissions shall be due and payable and chargeable to your
account with us at the date a Receivable arises.  The minimum commission payable
by you to us on each invoice evidencing a Receivable shall be $3.00.
 
6.2. Our charge specified in Section 6.1 hereof is based upon maximum selling
terms of 60 days, and no more extended terms or additional dating shall be
granted by you to any Customer without our prior written approval.  If such
approval is given by us, then for each additional thirty (30) days or part
thereof of such extended terms or additional dating, our charge with respect to
the Receivables covered thereby shall be increased by an amount equal to the
greater of (x) one quarter of one percent (1/4 of 1%) of the invoice amount of
such Receivable; or (y) twenty-five percent (25%) of the charge specified in
Section 6.1 hereof.  In addition, we shall charge you a fee of $5.00 for each
instance in which you change the terms of sale of any Receivable after you have
submitted to us a confirmatory assignment schedule listing such Receivable.
 
6.3. The minimum aggregate Base Commission payable under this Agreement shall be
$84,000.00 for each Contract Year, which shall be fully earned by us at the
beginning of each Contract Year, and which to the extent of any deficiency
(after giving effect to the commissions paid under Section 6.1), shall be
chargeable to your account with us on a monthly basis.
 

 
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6.4. You shall pay to us an aggregate closing fee of $25,000 in the first
Contract Year, which shall be fully earned on the Effective Date, and which
shall be payable on a monthly basis of $2,083.33 per month.

7.
Purchase Price; Interest Rate, Advances and Reserves:

7.1. The purchase price for each Receivable shall be the invoice amount of the
Receivable, less (i) returns (whenever made); (ii) selling discounts, credits or
deductions of any kind allowed, granted to or taken by the Customer at any time;
and (iii) our commission provided for in Section 6 hereof.  No discount, credit
or allowance with respect to any Receivable shall be granted by you, and no
return of Inventory shall be accepted by you without our prior written
consent.  A discount, credit or allowance may be claimed only by the
Customer.  All amounts collected against the purchase price shall be credited to
your account on the Payment Date.
 
7.2. In our sole discretion, in accordance with the terms of this Agreement, we
will, from time to time at your request, advance to you, sums up to 75% of the
aggregate Net Amount of Eligible Receivables outstanding at the time any such
advance is made less the Reserves, if any (the “Receivable Availability”); plus
whichever is less, 50% of the lower of cost or market value of Eligible
Inventory or $875,000.
 
7.3. You will pay to us interest on the daily balance of all monies, paid or
otherwise advanced to you or for your account net of all payments received from
you or on your behalf.  Interest upon the daily net balance of any monies
remitted, paid or otherwise advanced to or for your account before the Payment
Date (or interest applicable on the charges and expenses hereinabove or
hereinafter referred to) will be charged to you at a rate per annum equal to the
Interest Rate.  Interest will be charged to your account monthly in arrears.  We
may, in our sole discretion, remit to you, at any time, any amount standing to
your credit on our books.  Interest, as calculated above, will also be charged
to you on all other Obligations, except those specifying a different rate, from
the date incurred through the date paid. That portion of advances made by us to
you which is (i) in excess of the Receivable Availability, but not the sum of
the Receivable Availability plus the Inventory Availability, shall bear interest
at the Inventory Rate, and (ii) in excess of the sum of the Receivable
Availability plus the Inventory Availability, shall bear interest at the
Overadvance Rate.  Upon the occurrence of a Default, and for so long as such
Default continues, the Obligations shall, at our option, bear interest at the
Default Rate.  Interest shall be calculated on the basis of a
three-hundred-sixty (360) day year for the actual number of days elapsed.  In no
event shall any applicable interest rate under this Agreement exceed the maximum
rate permitted by applicable law and in the event excess interest is paid, it
shall be considered a repayment of principal.
 

8.
Statement Of Account and Expenses:

8.1. You shall pay to us any Obligations upon demand. You hereby irrevocably
authorize and direct us to charge at any time to your account any Obligations
owing to any of our Affiliates by charging your account.
 
8.2. We will render a statement of account monthly to you, and such statement
shall be binding upon you, except for specific matters which you contest and of
which we are notified in writing to the contrary, within sixty (60) days after
the date of such statement.
 
8.3. You shall pay all reasonable expenses (including attorneys, both in-house
and outside, fees) incurred by us in connection with the preparation and
execution of this Agreement and any other documents or agreements in connection
with or related to this Agreement, and the relationship established in
connection herewith and/or the transactions contemplated hereby, including,
expenses incurred in connection with the filing of financing statements under
the UCC and the making of record searches.  We may also charge to your account
any fees, costs or other expenses we incur to eliminate or cure any lack of
capacity that we may now or hereafter have to maintain an action in the courts
of any state to enforce payment or Receivables due from Customers located in
such state by reason of your acts or omissions, including your failure to
qualify as a foreign entity in such state, your failure to publish notices or
file an affidavit of publication relating to your existence as a limited
liability company or any other failure on
 

 
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your part to observe the laws of such state that are applicable to you or your
assets. You shall also pay to us such fees as we may charge from time to time
for, among other things, wire transfers, agings and special reports.  In
connection with our examinations of your books, records and operations you shall
pay all of our out-of-pocket expenses plus for each examiner the Standard
Examiner’s Rate in effect at the time of any such examination.  In connection
with our administration of this Agreement, our liquidation of any Collateral,
settlement of any Dispute, or enforcement of any Obligation, or our protecting,
preserving and enforcing our security  interests and rights hereunder, whether
through judicial proceedings or otherwise, or in defending or prosecuting any
actions or proceedings arising out of or relating to our transactions with you,
including actions or proceedings that may involve any Person asserting a
priority or claim with respect to the Collateral, all costs and expenses
incurred, including, attorneys’ (both in-house and outside) fees incurred by us,
shall be borne and paid for by you, and may, at our option, be charged to your
account with us.  Your reimbursement obligations pursuant to this paragraph
shall survive termination of this Agreement.
 
8.4. No delay or failure on our 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 a writing signed by us 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.  Unless otherwise specifically
provided in this Agreement, any notices, requests, demands or other
communications permitted or required to be given under this Agreement shall be
in writing and shall be sent by facsimile, hand delivery or by a nationally
recognized overnight delivery service, to the addresses and facsimile numbers of
the parties set forth below (or to such other address or facsimile number as a
party may hereafter designate by a notice to the other that complies with this
section) and shall be deemed given (a) in the case of a notice sent by
facsimile, when received by the recipient if the sending party receives a
confirmation of delivery from its own facsimile machine;  and (b) in the case of
a notice that is hand delivered or sent by such overnight courier, when
delivered (provided that the sending party retains a confirmation of
delivery).  Any notice which, pursuant to the terms hereof must be sent by you
by certified or registered mail shall be deemed given and effective when
received by us.
 
If to us
If to you
Rosenthal & Rosenthal, Inc.
1370 Broadway
New York NY 10018
Attn: David Flaxman, Esq., with a copy to J. Michael Stanley
Facsimile: (212) 356-0989
William Rast Sourcing, LLC
1212 Flower St., 5th Fl.
Los Angeles, CA  90015
Attn: Darryn Barber
Facsimile: (213) 745-2032

8.5 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.

9.
Payments:

9.1. All remittances obtained by you against Receivables will be received in
trust for us, and you will turn over to us the identical remittances as speedily
as possible; provided, however, that nothing herein authorizes you to collect
Receivables.  You constitute us, or any other entity or person whom we may
designate, as your attorney in fact at your own cost and expense to exercise, at
any time, all or any of the following powers which, being coupled with an
interest, shall be irrevocable until this Agreement has been terminated and you
have fully and indefeasibly paid and discharged all Obligations (a) to sign
and/or endorse your name on all remittances and all papers, bills of lading,
receipts, instruments and documents relating to the Receivables and the
transactions between us; (b) to deposit any checks or other remittances received
relating to the Receivables regardless of notations or conditions placed thereon
by your customers or deductions reflected thereby and to charge the amount of
any such deductions to your account; and (c) to sign your name to any and all
documents necessary to cure or eliminate any lack of capacity that we may now or
hereafter have, by reason of your acts or omissions, to maintain an action in
the courts of any state to enforce payment of Receivables due from Customers
located in such state, to publish any public notices relating to your existence
as a limited liability company required to cure or eliminate any such lack of
capacity, and to file such documents with the appropriate public officials or
agencies.
 

 
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9.2. If any payment or recovery is received from or on behalf of a Customer
which is a Customer on both Credit Approved Receivables and CR Receivables, any
such payment or recovery may be first applied to the Credit Approved Receivables
notwithstanding (i) any notation to the contrary on or with respect thereto;
(ii) the payment terms thereof; (iii) the due date thereof; or (iv) whether such
payments were made in the ordinary course of business or otherwise.
 

10.
Security Interest; Financing Statements:

10.1. To secure all of the Obligations, you hereby grant to us a security
interest in all of your Accounts, Instruments, Chattel Paper, Documents,
Investment property, General Intangibles, Deposit Accounts, Letter of Credit
Rights, property at any time in our possession, and the Reserves (whether or not
any of the foregoing are specifically assigned to us), in each case whether
currently owned or hereafter acquired by you and whether now existing or
hereafter arising (whether before, during the effectiveness of, or after the
termination of this Agreement) and wherever located, any security and guarantees
therefor, in any goods or property represented thereby, in all of your books and
records relating to the foregoing, and any equipment containing such books and
records, in all sums of money at any time to your credit with us, all of your
present and future claims against us under or in connection with this Agreement
and in all Proceeds. Without in any way limiting the generality of the
foregoing, you further sell, and assign to us and grant to us a security
interest, in all your right, title and/or interest in the Inventory represented
by Receivables as well as Inventory returned by or repossessed from Customers,
all of your rights as an unpaid vendor or lienor, all of your rights of stoppage
in transit, replevin and reclamation relating thereto, and all of your rights
against third parties with respect thereto.  You will cooperate with us in
exercising any rights with respect to any of the foregoing..
 
10.2. You authorize us to file financing statements and any and all other
documents that may now or hereafter be provided for by the UCC to reflect and/or
perfect any security interest now or hereafter granted by you to us in any of
your presently owned or hereafter acquired property.  In the event that any
jurisdiction requires a debtor’s signature on such financing statements and/or
such other documents, you authorize us to file such financing statements and/or
other documents on your behalf as your attorney in fact, which such power being
coupled with an interest, shall be irrevocable until this Agreement has been
terminated and you have fully and indefeasibly paid and discharged all of the
Obligations.
 

11.
Books and Records/Financial Statements:

We and our representatives shall, at all reasonable times, have the right to
examine all of your books and records.  You agree to prepare and furnish to us
within sixty (60) days after the close of each of your fiscal quarters,
financial statements reviewed and in such form and detail as we may reasonably
require.  You also agree to have prepared, and to furnish to us within ninety
(90) days after the close of each of your fiscal years, financial statements, in
accordance with GAAP, which have been reviewed by an independent certified
public accountant satisfactory to us.

12.
Term:

This Agreement shall commence on the date hereof, shall continue for one
Contract Period and shall automatically renew at the end of each Contract Period
for an additional Contract Period.  Notwithstanding the foregoing, this
Agreement may be terminated (i) by us at any time, on not less than sixty (60)
days prior written notice to you; or (ii) by you, effective at the end of a
Contract Period provided you give us notice in writing, by registered or
certified mail, not less than thirty (30) days, and not more than sixty (60)
days prior to the expiration of the then effective Contract Period, of your
intention to terminate this Agreement as at the end of such Contract Period; or
(iii) by you, at any time, upon your written request to us to terminate this
Agreement effective as of the date set forth in such

 
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request provided that (x) we in our sole discretion agree to such request and
(y) you pay to us an Early Termination Fee upon the effective date of such
termination.  In the event of a Default, we shall have the right to terminate
this Agreement at any time without notice, and you shall owe us an Early
Termination Fee calculated as of the date of such termination. The Early
Termination Fee shall become automatically due and payable in the event a
petition is filed by or against you under any provision of Title 11 of the
United States Code. Our rights and the Obligations arising out of transactions
having their inception prior to the termination date shall not be affected by
any termination or notice thereof, nor shall any transaction which by its terms
survives termination.  Any receivable which is a Credit Approved Receivable as
of the date of Termination and in respect of which such Credit Approval could
not have been withdrawn by us pursuant to Section 2 hereof as of such date of
Termination shall remain a Credit Approved Receivable (except to the extent a
Dispute thereafter arises with respect thereto) notwithstanding such Termination
and our right and obligations in respect thereof shall survive such Termination.
Any other Receivable shall automatically become a CR Receivable as of the date
of such Termination. Termination of this Agreement shall not become effective in
respect of the liens and security interests granted to us hereunder until you
have fully and indefeasibly paid and discharged all Obligations, and until such
time, you shall continue to furnish confirmatory assignments and  schedules of
Receivables to us and deliver and pay over to us all Proceeds in respect
thereof.  From and after the effective date of termination, all amounts charged
or chargeable to your account hereunder and all other Obligations, shall become
immediately due and payable without further notice or demand.

13.
Governing Laws/Jury Trial Waiver/Jurisdiction/Venue and Miscellaneous
Provisions:

This Agreement is deemed made in the State of New York and shall be governed,
interpreted and construed in accordance with the laws of the State of New York,
applicable to contracts made and to be performed within such state. No
modification, waiver or discharge of this Agreement shall be binding upon us
unless in writing and signed by us.  Our failure, at any time, to exercise any
right or remedy hereunder, shall not constitute a waiver on our part with
respect to such right or remedy, nor shall such failure preclude us from
exercising the same or any other right or remedy at any subsequent time.  If any
taxes are imposed upon us, or if we shall be required to withhold or pay any tax
or penalty because of or in connection with any transactions between us under
this Agreement, you shall indemnify us and hold us harmless in respect
thereof.  This Agreement embodies our entire agreement as to the subject matter
hereof and supersedes all prior agreements (whether oral or written) as to the
subject matter hereof.  TRIAL BY JURY IS HEREBY WAIVED BY EACH OF US IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF US AGAINST THE OTHER ON
ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
AGREEMENT OR THE RELATIONSHIP CREATED HEREBY (WHETHER SOUNDING IN TORT OR
CONTRACT).  YOU HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE SUPREME
COURT OF THE STATE OF NEW YORK (OR THE CIVIL COURT OF THE CITY OF NEW YORK IF
SUCH MATTERS BE WITHIN ITS JURISDICTION), AND OF ANY FEDERAL COURT IN SUCH
STATE, IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR A DETERMINATION OF ANY
DISPUTE AS TO ANY SUCH MATTERS.  IN CONNECTION THEREWITH, YOU HEREBY WAIVE
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREE THAT
SERVICE THEREOF MAY BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO YOU AT
YOUR ADDRESS SET FORTH ABOVE, OR SUCH OTHER ADDRESS AS SHALL HAVE PREVIOUSLY
BEEN COMMUNICATED TO US BY REGISTERED OR CERTIFIED MAIL.  WITHIN THIRTY DAYS
AFTER SUCH MAILING, YOU SHALL APPEAR OR ANSWER TO SUCH SUMMONS, COMPLAINT OR
OTHER PROCESS.  SHOULD YOU FAIL TO APPEAR OR ANSWER WITHIN SAID THIRTY DAY
PERIOD, YOU SHALL BE DEEMED IN DEFAULT AND JUIDGMENT MAY BE ENTERED BY US
AGAINST YOU FOR THE AMOUNT AS DEMANDED IN ANY SUMMONS, COMPLAINT OR OTHER
PROCESS SO SERVED.  In the event we shall retain attorneys for the purpose of
enforcing the performance, payment or collection of any of the Obligations, then
and in that event you agree to pay the fees of such attorneys, plus any and all
expenses and disbursements incurred in connection therewith and/or incidental
thereto.

 
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Our books and records shall be admissible as prima facie evidence of the status
of the account between us.  The use of “including” or “include” means “including
(or “include”), without limitation.”  The use of “or” means “and/or” if the
context so permits or requires.  The term “satisfactory to us” as used herein
shall mean “satisfactory to us in our sole and absolute discretion”. You will
not seek advice or counsel from us or any of our representatives with respect to
the management or operation of your business and if you deem such advice or
counsel to have been offered, directly or indirectly, you will evaluate it and
act or decline to act upon it based upon your own analysis and/or the advice or
counsel of your own independent expert(s) or consultant(s).  You agree that
there is no fiduciary relationship between us or our representatives and you or
any other entity, affiliated or controlled by you, and that you will not seek or
attempt to establish any such fiduciary relationship.  You hereby expressly
waive any right to assert, now or in the future, that there was or is a
fiduciary relationship between you and us and/or our representatives in any
action, proceeding or claim for damages. If any provision of this Agreement
shall for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof, and this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.  This Agreement shall be binding upon and inure to
the benefit of each of us and our respective heirs, executors, administrators,
successors and assigns, provided, however, that you may not assign this
Agreement or your rights hereunder without our prior written consent.

14.
Definitions:

As used in this Agreement, these terms shall have the following meanings which
shall be applicable to both the singular and plural forms of such terms.

“Accounts” shall have the meaning set forth in Article 9 of the UCC.

“Affiliate” of a Person shall mean any entity controlling, controlled by, or
under common control with, the Person and the term “controlling” and such
variations thereof shall mean ownership of a majority of the voting power of a
Person, or the contractual power to control such Person’s affairs.

“Agreement” shall mean this Factoring Agreement, as amended, modified or
supplemented.

“Availability under a Credit Line” shall mean the unused amount of a Credit
Line, unless otherwise suspended by us at any time (e.g., when Receivables due
from the Customer under a Credit Line are a certain number of days past due) and
communicated to you in writing or by such electronic means as may be designated
by us to you.

“Bank” shall mean JPMorgan Chase Bank or any successor thereto.

“Base Commission” shall have the meaning set forth in Section 6.1 hereof.

“Business Day” shall mean a day on which we and major banks in New York City are
open for the regular transaction of business.

“Chattel Paper” shall have the meaning set forth in Article 9 of the UCC.

“Collateral” shall mean any property or rights in property whenever arising
which now or hereafter secure any of the Obligations.

“Contract Period” shall mean (i) the consecutive twenty-four month period
following the last day of the month in which the Effective Date falls; and (ii)
each consecutive 24 month period thereafter.

“Contract Year” shall mean the consecutive twelve month period following the
last day of the month in which the Effective Date falls and each consecutive
twelve month period thereafter.

 
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“Credit Approval” shall mean either (i) a notice from us to you, in writing or
by such electronic means as may be designated by us, that we have approved all
or a portion of an Order; or (ii) Availability under a Credit Line.

“Credit Approved Receivable” shall mean a Receivable for which we have assumed
the Credit Risk.

“Credit Line” shall mean a line of credit, established by us and communicated
from time to time to you in writing or by such electronic means as may be
designated by us to you, granting approval for sales by you, or rendition of
services by you to a Customer, billed at a specified location or locations, up
to a specified aggregate available amount.

 “Credit Risk” shall mean the risk of loss resulting from a Customer’s failure
to pay a Credit Approved Receivable on the due date solely because of the
Customer’s financial inability to make such payment.

“CR Receivable” shall mean any Receivable which is not a Credit Approved
Receivable.

“Customer” shall mean any Person obligated on a Receivable.

“Default” shall mean the occurrence of any of the following events: (1.)
nonpayment when due of any amount payable on any of the Obligations; (2.)
failure to perform any material term of any agreement or meet any obligation in
this Agreement or in any agreement out of which any of the Obligations arose;
(3.) breach or failure to continue to be true and accurate in all material
respects of any covenants, representation, warranty or agreement whenever made
by you to us, whether pursuant to this Agreement or otherwise; (4.) default by
you in repayment, when due, of any indebtedness now or hereafter owed for monies
borrowed from anyone other than us; (5.) any statement, or warranty of yours
made orally or in writing or in any other writing in or in connection with this
Agreement or statement at any time furnished or made by you to us is untrue in
any material respect as of the date furnished or made; (6.) suspension of the
operation of your business; (7.) 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, as amended, is brought by or
against any Obligor; (8.) death of any Obligor who was a natural person, or
death or withdrawal of any partner of any Obligor which is a partnership, or
death or withdrawal of any member or any Obligor which is a limited liability
company, or dissolution, merger or consolidation of any Obligor which is a
corporation or limited liability company; (9.) sale, transfer or exchange,
either directly or indirectly, of a controlling stock interest of any Obligor
which is a corporation or a controlling membership interest of any Obligor which
is a limited liability company; (10.) termination or withdrawal of any guaranty
of the Obligations or failure of a Person who has executed such a guaranty, to
provide to us, no later than 5 days following the anniversary of the Effective
Date in each year and thirty (30) days after our written demand therefor, a
financial statement, signed by such Person, that is satisfactory to us as to
form and substance; (11.) appointment of a receiver for any collateral pledged
for the Obligations or for any of your property, or the property of any Obligor,
in which we have an interest; (12.) the Pension Benefit Guaranty Corporation
shall commence proceedings under Section 4042 of the Employee Retirement Income
Security Act of 1974 (ERISA) to terminate any of your employee pension benefit
plans; (13.) any litigation shall be commenced against you that would, if
adversely determined, have a material adverse effect on your business; (14.) we,
in good faith reasonably exercised, deem the prospect of your payment or
performance of the Obligations to have been impaired;  (15.) failure to deliver
to us a policy, on the life of Colin Dyne, of Key Man Life Insurance in an
amount of not less than $3,000,000, from an insurer acceptable to us, against
which policy there are no loans and on which we are named loss payee; or (16)
we, in good faith, reasonably exercised, deem ourselves insecure.
Notwithstanding anything to the contrary contained in this section, (i) to the
extent that an event or occurrence described this section consists of your
failure to take, do or perform an act or action, then such failure shall not
constitute a Default if no other Default has occurred and if such act or action
is taken, done or performed by you within 5 Business Days after our

 
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notifying you in writing that the act or action is required to be taken, done or
performed by you and has not be taken, done or performed; and (ii) to the extent
that an event or occurrence described in this section consists of the
commencement of a proceeding against Borrower under Federal or state law or the
appointment of a receiver or custodian under Federal or state law, then the
commencement of such proceeding or the appointment of such receiver or custodian
shall not constitute a Default if no other Default has occurred and if such
proceeding or appointment is contested by Borrower within the time period and in
the manner required by law and is dismissed, terminated or vacated within thirty
(30) Business Days after such commencement or appointment

“Default Rate” shall mean the rate which is three percent (3%) per annum in
excess of the Overadvance Rate.

“Deposit Account” shall have the meaning set forth in Article 9 of the UCC

“Deposit Date” shall mean with respect to a payment of a Receivable from or on
behalf of a Customer, (i) in the case of a payment that is received by a banking
institution and deposited into our account with it (x) prior to 12:00 noon on
any day the date such banking institution makes such deposit into our account;
(y) after 12:00 noon on any day, the following Business Day; and (ii) in all
other cases, the Business Day following the date that the payment is actually
received by us.

“Dispute” shall mean  (i) any dispute, claim, offset, defense, counterclaim or
any other reason (including, merchandise returns) or no reason for nonpayment of
or any refusal to pay all or a portion of any receivable other than a customer’s
financial inability to pay, regardless of whether the same is in an amount
greater than, equal to or less than the Receivable concerned, whether bona fide
or not, and regardless of whether the same, in part or whole, relates to an
unpaid Receivable or any other Receivable; and (ii) or the payment of all or
part of a Receivable by the Customer obligated thereon, to a Person other than
us, and an act of God, force majeure, the acts of restraint of public
authorities whether domestic or foreign, civil strife, war or currency
restrictions or fluctuations resulting in nonpayment of all or any portion of
any Receivable.

“Documents” shall have the meaning set forth in Article 9 of the UCC.

“Effective Date” shall mean the date specified on the upper right portion of the
first page of this Agreement.

“Early Termination Fee” shall mean the amount that you and we agree will
compensate us for the damages we will sustain if this contract is terminated by
you prior to the end of a Contract Period or by us due to a Default by you or
automatically as the result of the filing by or against you of a petition under
any provision of Title 11 of the United States Code.  The Early Termination Fee,
which you and we have agreed represents a reasonable approximation of the amount
of such damages (due to the impossibility of calculating such amount in
advance), shall be equal to the minimum factoring commission pursuant to Section
6.3 hereof, for the then current Contract Period, less all factoring commissions
actually paid prior to the effective date of termination.

“Eligible Inventory” shall mean inventory of finished goods on premises (or in a
warehouse) within the continental United States) for which we have obtained such
agreements with the lessors of such premises (or the owners or operators of such
warehouse) as may be acceptable to us in our sole discretion, valued at the
lower of cost or market, free and clear of all customs duty and other liens,
charges or claims (with the exception of claims for rent, warehouse or storage
charges that are not past due), and in which we have a first and only perfected
security interest, and which is acceptable to us in our sole discretion, and at
all times shall be acceptable in all respects in our sole discretion. In
determining eligibility, we may, but need not, rely on your designations of
inventory furnished to us but reliance thereon, from time to time, shall not be
deemed to limit our discretionary right to determine and/or revise standards of
eligibility at any time. In general, inventory shall not be deemed eligible
unless it complies in all respects with the representations, covenants and
warranties provided herein and on designations of inventory furnished to us from
time to time and meets all standards imposed by any governmental agency or
authority.

 
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“Eligible Receivables” shall mean, at the time of the calculation thereof all
Receivables less (i) any Receivables subject to a Dispute, (ii) any CR
Receivables, (iii) any Receivables owing from a Customer whose total obligations
to you exceed twenty five percent (25%) of all Eligible Receivables; and (iv)
any Receivables which we in our sole discretion deem not to be Eligible
Receivables.

“GAAP” shall mean generally accepted accounting principles in the United States
of America as in effect from time to time as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board which are applicable to the circumstances
as of the date of the determination consistently applied.

“General Intangibles” shall have the meaning set forth in Article 9 of the UCC
(and shall include tradenames, trademarks, tradestyles, service marks,
copyrights and patents and all your rights and claims against us hereunder or
otherwise).

“Guarantor” shall mean any Person, other than you, liable primarily or
secondarily, directly or indirectly, on any of the Obligations.

“Instruments” shall have the meaning set forth in Article 9 of the UCC.

“Interest Rate” shall mean the greater of (i) the Prime Rate plus 1.5% per
annum; or (ii) 5.5% per annum. Any change in the Interest Rate shall be
effective as of the date of any change in the Prime Rate.
“Inventory” shall have the meaning set forth in Article 9 of the UCC.

“Inventory Availability” shall have the meaning set forth in Section 7.2 hereof

“Inventory Rate” shall mean the rate which is one percent (1%) per annum in
excess of the Interest Rate as adjusted pursuant to Section 7.3 hereof.

“Investment Property” shall have the meaning set forth in Article 9 of the UCC.

 “Letter of Credit Rights” shall have the meaning set forth in Article 9 of the
UCC.

"Net Amount of Eligible Receivables" shall mean the Net Amount of Receivables
for all Eligible Receivables.

 “Net Amount of Receivables” shall mean the gross amount of Receivables, less
maximum discount, less returns, less credits or allowances of any nature at any
time issued, owing, granted or outstanding, and less also our commission as set
forth herein.

“Obligations” shall mean all obligations, advances, liabilities and indebtedness
of you or your Affiliates to us or any of our Affiliates, however evidenced,
arising under this Agreement, under any other or supplemental financing provided
to you or an Affiliate, or independent hereof or thereof, whether now existing
or incurred from time to time hereafter and whether before or after termination
hereof, absolute or contingent, joint or several, matured or unmatured, direct
or indirect, primary or secondary, liquidated or unliquidated, and whether
arising directly or indirectly or acquired from others (whether acquired
outright, by assignment, unconditionally or as collateral security from another
and including, participations or interest obligations to others), and including,
all of our charges, commissions, fees, interest, expenses, costs and attorneys’
fees chargeable to you in connection therewith, and all of your obligations to
us as an indemnitor pursuant to the terms of this Agreement.

 
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“Obligor” shall mean you and each other Person (including, any Guarantor or
direct or indirect provider of collateral) primarily or secondarily, directly or
indirectly, liable on, or providing collateral for, any of the Obligations.

“Order” shall mean any purchase order or equivalent document for the sale by you
of goods or the rendition by you of services.

“Overadvance Rate” shall mean the rate which is three percent (3%) per annum in
excess of the Interest Rate as adjusted pursuant to Section 7.3 hereof.

“Payment Date” with respect to a Receivable shall mean the date which is 4
Business Days after the Deposit Date thereof.

“Permitted Lien” shall mean a lien or security interest to which we have
specifically consented in writing, subject to any limitation set forth in such
writing.

“Person” shall mean any individual, sole proprietorship, partnership, joint
venture, trust, non-registered organization, association, corporation, limited
liability company, government or any subdivision, agency or political
subdivision thereof or any other entity.

“Prime Rate” shall mean the rate of interest from time to time publicly
announced in New York City by the Bank as its prime rate.  The Prime Rate may
not be the lowest or best rate charged by the Bank.

“Proceeds” shall mean all proceeds (as set forth in Article 9 of the UCC),
products, rents and profits of or from any and all of the Collateral and, to the
extent not otherwise included in the foregoing; (i) all payments under any
insurance, indemnity, warranty or guaranty with respect to any of the
collateral, (ii) all payments in connection with any requisition, condemnation,
seizure or forfeiture with respect to any of the Collateral, (iii) all claims
and rights to recover for any past, present or future infringement or dilution
of or injury to any Collateral; and (iv) all other amounts from time to time
paid or payable under or with respect to any of the Collateral, including
licensing and royalty fees.

“Receivable Availability” shall have the meaning set forth in Section 7.2
hereof.

“Receivables” shall mean all Accounts, Instruments, Chattel Paper, Documents,
Investment Property and General Intangibles arising from your sales of Inventory
or performance of services, and the Proceeds thereof, and all Supporting
Obligations, whether now existing or hereafter created.

“Reserves” shall mean any set asides, reductions or reserves which we may
establish, from time to time, in our sole option and in our sole discretion in
connection with any financial accommodations which we may make available to you
in connection with this Agreement.

“Special Account Schedule” shall mean a schedule issued, from time to time,
listing thereon surcharge commissions applicable to Receivables owing from the
Customers listed thereon.

“Standard Examiner Rate” shall mean the per diem rate per examiner established
by us from time to time.  The Standard Examiner Rate on the date hereof is $850.

 
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“Supporting Obligations” shall have the meaning set forth in Article 9 of the
UCC.

“UCC” shall mean the Uniform Commercial Code as the same may be in effect
(subject to revision, from time to time) in the State of New York.

YOU ACKNOWLEDGE THAT WE HAVE ADVISED YOU TO CONSULT WITH AN ATTORNEY PRIOR TO
YOUR EXECUTION OF THIS AGREEMENT.

ROSENTHAL & ROSENTHAL, INC.

By:   /s/ J. Michael Stanley      
Name:   J. Michael Stanley
Title:     Managing Director

AGREED:

WILLIAM RAST SOURCING, LLC

By:  /s/ Colin Dyne         
Colin Dyne, Manager

 
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