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EXHIBIT 10.5
CONFIDENTIAL INVOICE DISCOUNTING AGREEMENT
BETWEEN
HUGO INTERNATIONAL LIMITED
AND
FIVE ARROWS COMMERCIAL FINANCE LIMITED
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MC/PW/
To the Directors
Hugo International Limited
6 Waterside Drive
Slough
Berks
SL3 6EZ
23rd December 1998
Dear Sirs
We attach in duplicate the Term Sheet and Agreement confirming the terms and
conditions upon which we are willing to discount the receivables of your
business and you will note that certain expressions are defined in Clause 1 of
the Agreement. The enclosed documents supersede any previous discussions,
quotations or agreements between us and, subject to any variation in accordance
with Clause 14.4(b), these will be the only terms and conditions of our
Agreement. Will you please indicate your acceptance of these terms by signing
the Term Sheet in duplicate and executing the agreement where indicated and
return both copies to us.
We very much hope for a long and mutually rewarding association.
Yours faithfully
MARK CONNELLY
------------------
Managing Director
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FIVE ARROWS COMMERCIAL FINANCE LIMITED
TERM SHEET
Serial No. MAO313
CLIENT: HUGO INTERNATIONAL LIMITED ("the Client")
Registered Office: 122 (a) Nelson Road, Whitton, Twickenham
Registered No.: 02757258
This Term Sheet is the Term Sheet described in the attached Master Invoice
Discounting Agreement ("the Agreement") Serial No.: MA03 13 dated 18/March 1999
and supersedes all prior Term Sheets relative to the Agreement. The terms of the
Agreement shall be incorporated herein as though set out in full.
1. TERMS:
(a) Bank Royal Bank of Scotland PLC
PG Box 450, 5-10 Great Tower Street
London, EC3P 3JX
Sort Code: 16-04-00
Trust Account No. 20248787
(b) Commencement Date 19/March/1999
(c) Initial Payment 70%
(d) Initial Set-up Charge 0.3%
(e) Margin (over the Rate) 2.5%
(f) Minimum Annual Service Charge pound sterling 12,000
(g) Minimum Period 12 months
(h) Reserve Fund Percentage 30%
(i) Review Limit pound sterling 600,000
(j) Service Charge 0.3%
(k) Settlement Date 90 days from month in which the
invoice is raised
(All charges are exclusive of any applicable Value Added Tax)
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Dated 18th/March l999
FIVE ARROWS HUGO INTERNATION LIMITED
COMMERCIAL FINANCE LIMITED
By: /s/ Mark Connelly By: /s/ D. W. Foden
---------------------- ---------------------
Name: Mark Connelly Name: D. W. Foden
Office: Director Office: M.D.
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MASTER INVOICE DISCOUNTING AGREEMENT
SERIAL NO: MAO313
PARTIES:
(1) FIVE ARROWS COMMERCIAL FINANCE LIMITED whose registered office
is at New Court, St Swithin's Lane, London, EC4P 4DU ("Five
Arrows") (which expression shall include its successors and
assigns).
(2) THE CLIENT whose name and registered office address are set
out in the Term Sheet ("the Client").
DEFINITIONS:
1.1 In this Agreement except where the context otherwise requires
each of the following expressions shall bear the meaning
respectively shown opposite it below:
"Bank" the bank named in the Term Sheet or such
other bank in Great Britain as Five Arrows
may nominate by an amendment to the Term
Sheet from time to time;
"Business Day" a day (other than a Saturday) on which
banks are open for the transaction of
business in London of the nature required
for this Agreement;
"Client" the Client named in the Term Sheet;
"Collection Payment" any amount received by Five Arrows from a
Customer in respect of a Debt less the
aggregate of:
(i) the Initial Payment (if any)
already paid to the Client;
(ii) the Service Charge;
(iii) Costs and all other sums due to
Five Arrows in respect of the Debt
"Commencement Date" the date specified in the Term Sheet;
"Contract of Sale" a contract for the sale of goods
and/or work done and materials supplied
and/or services rendered and/or hiring by
the Client to a customer under which a Debt
arises;
"Customer" in relation to a Contract of Sale, the
purchaser, hirer or other person liable for
the price or other payment and named in the
relative Invoice;
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"Debt" a Debt (whether presently payable or not)
arising from a Contract of Sale to a
Customer calculated at the gross book value
including VAT and before taking into account
any reduction which may be agreed between
the Client and the relative Customer or any
prompt payment discount;
"Discount Charge" an amount calculated by daily applying the
aggregate of the Margin and the Rate to the
difference between the total amount paid by
Five Arrows to the Client, by way of Initial
Payments together with all other sums paid
to the Client, or paid on the Client's
behalf or at the Client's direction or
debited to the Client's account with Five
Arrows pursuant to this Agreement, and the
total of receipts from Customers;
"Initial Payment" The percentage specified in the Term Sheet
of Debts notified to Five Arrows less the
Service Charge;
"Initial Set-up either the percentage specified in the Term
Charge" Sheet of the gross book value of the Debts
taken over on the Commencement Date or the
flat amount so specified (as the case may be)
plus in either case VAT;
"Insolvent" and/or in relation to any person, firm or company
"Insolvency" any of following:
(a) any act of bankruptcy,
sequestration or the passing of a
resolution or the presentation of a
petition for the winding up of a
company;
(b) the appointment of a Receiver, the
making of any composition or
arrangement (whether formal or
informal) with or for the benefit
of creditors or the calling of a
meeting for the same;
(c) an encumbrancer taking possession
of the whole or any material part
of its assets or any distress
execution or sequestration being
levied upon or sued out against any
of its assets;
(d) the making of a petition or
application for any order under the
Insolvency Act 1986;
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(e) the remaining unsatisfied of any
judgement or award of any court
tribunal or arbitration for a
period of seven days;
(f) the ceasing or threat of ceasing to
carry on business;
(g) the giving of notice of suspension,
or of a moratorium on payment, of
debts;
(h) inability to pay all debts as they
fall due or any other similar event
under any applicable law;
"Margin" for the purposes amongst other things of "the
Discount Charge" the percentage per annum
specified in the Term Sheet;
"Minimum Annual for the purposes amongst other things of
Service Charge" Clause 7(c) the amount exclusive of VAT
specified in the Term Sheet commencing from
the first day of the month following the
Commencement Date;
"Minimum Period" the minimum number
of months specified in the
Term Sheet from the
Commencement Date for which
this Agreement is to
continue;
"Purchase Price" the meaning ascribed to that term in Clause
5.3;
"the Rate" the base rate of the
Bank from time to time
subject to a minimum base
rate of 5.5% per annum (or
if the Bank ceases to quote
a base rate the base rate
or other comparable rate
quoted by a London clearing
bank selected by Five
Arrows);
"Receiver" a receiver, receiver and
manager, administrator,
administrative receiver,
liquidator or other person
entrusted by law with the
management of a company's
affairs (other than its
directors) under any
applicable law;
"Reserve Fund" the balance which Five Arrows in its sole
discretion from time to time and at any time
considers necessary to hold on the Client's
account as a reserve against sums actually
or contingently due to Five Arrows from the
Client and until Five Arrows otherwise
determine it will be not less than the
percentage specified in the Term Sheet of
all unpaid Debts;
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"Schedule" a schedule in a form specified by Five
Arrows from time to time duly executed by an
authorised signatory of the Client;
"Security Interest" any mortgage, pledge, encumbrance, right of
set off or other security interest howsoever
created or arising;
"Service Charge" the percentage specified in the Term Sheet
of the gross book value of each Debt before
any credit purchased by Five Arrows;
"Settlement Date" the date by which each Debt is to be paid
namely the date which is the number of days
specified in the Term Sheet after the end of
the month as at which the relative invoice
is dated;
"Termination Event" any event referred to in Clause 6.2;
"Term Sheet" the term sheet as executed by the Client and
Five Arrows to which this Agreement is
attached, as such term sheet may be
substituted from time to time;
"Trust Account" for the purposes amongst other things of
Clauses 12 and 13 an account of the Client
with the Bank as specified by Five Arrows in
the Term Sheet to which payment of all debts
is to be credited;
"VAT" Value Added Tax.
1.2. Any reference in this Agreement to a Termination Event
includes a reference to any event which with the giving of
notice and/or the lapse of time and/or a determination being
made under the relevant sub-clause would constitute a
Termination Event.
1.3. Reference in this Agreement in Clause 8.1 include references
to the Term Sheet, each Schedule, any documents related to
this Agreement or any Schedule (in particular but without
limitation the Debenture referred to in Clause 2) and any
assignment, assignation or other document referred to in
Clause (3) and any documents necessary for enforcement.
1.4. Clause headings are for ease of reference only.
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COMMENCEMENT AND DURATION
2.1 This Agreement shall commence on the Commencement Date and
will (subject to Clauses 2.2 and 6.2) remain in force for the
Minimum Period.
2.2 Five Arrows's obligations under this Agreement are conditional
on the execution and registration of a first fixed Legal
Charge over all the book and other debts of the Client in
favour of Five Arrows and in form and substance satisfactory
to Five Arrows.
PURCHASE OF DEBTS AND NOTIFICATION
3.1 The Client agrees to sell and Five Arrows agrees to purchase
all Debts notified in a Schedule. The ownership of each such
Debt will vest in Five Arrows on the date Five Arrows receives
the relative Schedule.
3.2 On a Debt vesting in Five Arrows there shall automatically
vest in Five Arrows all the Client's rights in relation to the
relative Contract of Sale and all remedies for enforcing
payment of the Debt together with the Client's title to and
all rights in the goods to which the Contract of Sale relates
and all insurances and securities taken or held by the Client
in connection therewith.
3.3 On request by Five Arrows or on Five Arrows's behalf the
Client will forthwith create and deliver to Five Arrows at the
Client's cost, formal written, executed and duly stamped
assignments or assignations of the Debt or of the title,
rights, instruments, insurances and securities referred to
above and the Client shall thereupon give notice to Customers
of the assignment of Debts hereby constituted.
3.4 The Client will on the Commencement Day, deliver to Five
Arrows a Schedule notifying Five Arrows of the existence of
all Debts outstanding on that date (other than Debts under
Clause 4.1). Each Schedule shall also specify separately those
Debts then existing which are not being notified by virtue of
Clause 4.1. Thereafter from time to time (but not more than
once in every 7 days, or at such interval as Five Arrows may
agree) the Client will deliver further Schedules as Debts
arise. With each Schedule the Client will deliver to Five
Arrows a copy of the invoice referred to therein together with
such proof as Five Arrows may require of the performance of
the Contract of Sale or its terms. Each invoice will show its
due date for payment. Until Five Arrows otherwise directs, the
Client should not disclose the purchase of Debts by Five
Arrows to Customers.
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NON-NOTIFIABLE DEBTS
4.1 Until Five Arrows gives the Client notice to the contrary the
Client will not be required to deliver Schedules relating to
the following classes of Debts:
(i) Debts due from a director or shareholder or employee
of the Client;
(ii) Debts due from any person whose relationship with the
Client is within the meaning of "associate" as
defined by Section 184 of the Consumer Credit Act
1974;
(iii) Debts due from the sale of any of the Client's
capital assets;
(iv) Debts which are not due in respect of the Customer's
trade occupation or profession or where the Customer
does not have an established place of business;
(v) Debts arising under a conditional sale or hire
purchase or leasing or consumer credit sale
agreement;
(vi) Debts due in respect of goods delivered on sale or
return or on approval;
(vii) Debts arising under any Contract of Sale involving
progress payments or RIBA or JCT or similar terms or
where payment is required prior to completion of
performance of the Contract of Sale;
(viii) Debts arising under any Contract of Sale with a
Ministry of the Crown.
4.2 Until the Client is required to deliver Schedules in respect
of the above classes of Debts Five Arrows shall not be obliged
to purchase any Debts of those classes or make any Initial
Payments to the Client and the trust provisions of Clause 13
shall not apply and no Service Charge shall accrue to Five
Arrows in respect thereof.
PURCHASE PRICE
5.1 The Purchase Price for each Debt vesting in Five Arrows shall
be the Initial Payment and the Collection Payment relating to
such Debt.
5.2 Out of the Purchase Price Five Arrows will maintain the
Reserve Fund. The Client will not be entitled to interest on
the Reserve Fund.
5.3 Subject to the requirements of the Reserve Fund Five Arrows
will deal with the Purchase Price of each Debt as follows:
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(a) The Initial Payment relative to that Debt will be available to
the Client in Sterling, not later than two Business Days after
receipt of the relative Schedule, and
(b) The Collection Payment will be available to the Client
forthwith after receipt of a payment from the Customer subject
to all rights in Five Arrows's favour contained in this
Agreement and to Five Arrows's right to withhold the
Collection payment until banker's cleared funds are available.
5.4 Five Arrows will be under no obligation to make available to the Client
either any Initial Payments or Collection Payments whilst the aggregate
amount of Initial Payments in respect of Debts vesting in Five Arrows
and remaining unpaid together with any unpaid Service Charges and
Discount Charges and other charges and fees exceeds the Review Limit
specified in the Term Sheet.
5.5 (a) The Client shall pay all Bank Charges and/or commission for
collection and/or where a Debt is payable otherwise than in
Sterling conversion into Sterling; and
(b) Where a Debt is payable otherwise than in Sterling the
Purchase Price shall be calculated by reference to the rate of
exchange for the purchase of Sterling with the other currency
quoted by the Bank at or about 11:00 am on the date of
Collection but for administrative convenience Five Arrows
shall provisionally apply the said rate of exchange on the
date of receipt of the relative Schedule making such
adjustments as may thereafter be necessary. A similar
provision shall apply to the calculation and payment of the
Re-purchase Price where Five Arrows exercises its right of
Re-purchase so that the Client bears any risk, but receives
any reward, resulting from exchange rate fluctuations.
REPURCHASE
6.1 Upon notification from Five Arrows the Client shall repurchase
a Debt or the balance thereof unpaid by the Customer upon any
of the following events:
(a) the Insolvency of the Customer;
(b) the Customer failing to pay the gross invoice value
(less any prompt payment discount not exceeding 5%)
by the Settlement date; or
(c) upon Solicitors or any collection agent being
instructed to collect the Debt.
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6.2 Five Arrows may terminate this Agreement and upon notification
from Five Arrows the Client will repurchase all Debts
specified by Five Arrows at any time after any of the
following events:
(a) the Client fails to pay any amount due under this
Agreement on the due date or on demand if so payable;
(b) the Client fails to observe or perform any of its
obligations under this Agreement and in the case of a
failure capable of being remedied Five Arrows does
not determine that it has been remedied to Five
Arrows's satisfaction within 21 days of the Client
becoming aware of such failure;
(c) any warranty, representation or statement made or
acknowledged to have been made by the Client in this
Agreement or any Schedule or to Five Arrows in
connection therewith proves to be incorrect in any
material respect;
(d) Insolvency occurs in relation to the Client or any
guarantor or indemnitor of the Client;
(e) Five Arrows in its absolute discretion considers
that:
(i) a material adverse change in the Client's
financial condition or performance has
occurred;
(ii) changes in the officers, senior management
or shareholders (legal or beneficial) in the
Client are adverse to Five Arrows's
interest;
(iii) the Client's administration, management or
controls are inadequate for the proper
operation of this Agreement; or
(f) this Agreement is terminated under Clause 6.3.
6.3 Either Five Arrows or the Client may at any time after the
expiry of the Minimum Period terminate this Agreement without
prejudice to Five Arrows's rights actual or contingent accrued
at that date by not less than six months' prior notice.
6.4 The Repurchase Price of each Debt shall be a sum representing
the difference between:
(a) the aggregate of:
(i) the Initial Payment;
(ii) the Service Charge;
(iii) the Discount Charge; and
(iv) the costs and all other sums due to Five
Arrows hereunder;
AND
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(b) all sums received from the Customer in respect of
that Debt.
6.5 Upon Five Arrows giving notice that Five Arrows no longer
require a Debt to be vested in Five Arrows or upon payment of
the Repurchase Price under Clause 6.4 the ownership and all
subsisting rights in respect of the Debt shall be re-vested in
the Client. Five Arrows shall be entitled to give notice of
the same to the Customer where Five Arrows considers it
appropriate. On such re-vesting all Five Arrows's rights and
obligations under this Agreement in relation to such Debt
shall thereafter cease but without prejudice to Five Arrows's
rights accrued before re-vesting. If such Debt has been
formally assigned to Five Arrows under Clause 3.3 Five Arrows
will upon request execute a formal re-assignment thereof to
the Client.
CHARGES
7. The Client's account with Five Arrows will be subject to the
following charges:
(a) A Service Charge in respect of each Debt purchased by
Five Arrows;
(b) An Initial Set-up Charge which will be payable on the
Commencement Date;
(c) A sum equal to the deficiency (if any) between the
Minimum Annual Service Charge and the Service Charges
in any period of twelve months expiring on the
anniversary of the first day of the month succeeding
the Commencement Date. A pro rata sum on account of
any Minimum Annual Service Charge may be debited to
the Client's account immediately on a monthly basis.
In the event of Termination of this Agreement other
than under the terms of Clause 6.3, Five Arrows may
at our absolute discretion charge the higher of six
months' pro rata Minimum Charges or a sum equal to
six times the average monthly Service Charge actually
debited by Five Arrows in the twelve months period or
pro rata part thereof prior to the termination of
this Agreement;
(d) the Discount Charge;
(e) Interest at the rate per annum equal to the aggregate
of the Margin and the Rate upon any balance from time
to time due from the Client to Five Arrows other than
a balance in respect of which the Discount Charge is
payable.
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GENERAL ACCOUNTING PROCEDURES
8.1 Five Arrows may debit the Client's account with all expenses
incurred by Five Arrows in or enforcing this Agreement and any
ancillary documentation including all legal fees together with
all stamp duties, penalties and fines payable on assignments
and reassignments of any nature together with any losses,
expenses or damages (contingent or otherwise) suffered by Five
Arrows in the event of any breach of this Agreement. Five
Arrows may debit its reasonable estimate of such expenses to
the Client's account subject to later adjustment.
8.2 Five Arrows may debit the Client's account on an indemnity
basis with legal and all other costs and expenses incurred by
Five Arrows in collecting or attempting to collect any Debt or
disposing of any litigation whether these are Five Arrows's
own or those due to any other person.
YOUR RECORDS AND REPORTS
9.1 The Client shall maintain a monthly open item ageing analysis
in such form as Five Arrows may require showing the position
of each Customer's account with the Client on the last day of
each month including details of any outstanding credit
balances. The Client will supply Five Arrows with copies of
such analysis and the Client's sales ledger control by the
tenth day of the following month and at any time forthwith
upon request.
9.2 The Client will keep all books required by law together with
true and accurate accounts and minute books. All ledgers of
Debts shall bear a conspicuous notation that they have been
assigned to Five Arrows. The Client shall allow Five Arrows
and its authorised representatives to inspect the same and all
orders, original correspondence and the Client's bank
statements without prior notice and if requested shall provide
Five Arrows with copies.
9.3 The Client shall within seven days of Five Arrows's request
provide Five Arrows with financial statements and such other
information and documents relating to the Client's business
and to Debts and Contracts of Sale as Five Arrows may require.
In particular the Client will keep available for Five Arrows's
inspection copies of all invoices and debit and credit notes
and documents evidencing how Debts are reduced paid or
otherwise satisfied, together with information regarding
disputed Debts or Debts placed with Solicitors for collection
or any Debts where there have been breaches of the warranties
contained herein or where the Customer has become insolvent or
been unable to pay by the Settlement Date. The Client will
send to Five Arrows each day a report of the collections made
by the Client.
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9.4 Upon the Client's failure to assist Five Arrows, then, without
prejudice to any other rights in Five Arrows's favour, Five
Arrows may immediately adjust the Reserve Fund and at the
Client's expense appoint accountants and professional experts
to obtain such information as Five Arrows may require.
9.5 The Client will send to Five Arrows as soon as they become
available but in any event within three months after the end
of each of its financial periods (which shall not be longer
than fifteen months) copies of its audited financial
statements for that period. The Client shall also send to Five
Arrows copies of its quarterly management accounts within one
month after the end of that quarter, copies of each of its
interim statements and other circulars to its shareholders
when sent to shareholders and the Client will promptly supply
to Five Arrows with such additional financial or other
information as Five Arrows may reasonably request.
RECORDS TO BE MAINTAINED BY FIVE ARROWS
10.1 Five Arrows will maintain such accounts as Five Arrows shall
consider necessary to record the amounts due from Five Arrows
however arising to the Client and/or vice versa.
10.2 Copies of such accounts will be delivered to the Client at
such intervals as Five Arrows shall consider necessary. Unless
the Client notifies Five Arrows within 30 days of receipt that
any item therein is disputed then such record (save for
manifest error) will be binding upon the Client.
WARRANTIES, UNDERTAKINGS AND INDEMNITY
11.1 The Client represents and warrants to Five Arrows (and upon
each delivery of a Schedule, shall be deemed to represent and
warrant to Five Arrows) that:
(a) each Debt will arise and each sale of a Debt will be
made in the ordinary course of its business;
(b) each sale of a Debt pursuant to this Agreement shall
be made by the Client to Five Arrows with Full Title
Guarantee subject to disclosure in accordance with
Clause 11.3 below;
(c) each Contract of Sale, and each instrument or other
document referred to in Clause 3 shall be governed by
English law and each Debt will be governed by the
laws of England;
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(d) each Debt is undisputed, is payable on or before the
Settlement Date and each Debt and each Contract of
Sale is legally enforceable in accordance with its
terms by Five Arrows as assignee of the Client;
(e) there are no contra accounts, set-offs, counterclaims
or deductions allowable or enforceable against any
Debt by the Customer or any other person (including
without limitation any supplier or other person
claiming retention of title);
(f) all statements contained in and all signatures
appearing on every order, invoice and other document
relating to a Debt or a Contract of Sale or on any
other document delivered to Five Arrows hereunder are
true and genuine accurate and complete;
(g) the Client is duly incorporated in England as a
limited liability company;
(h) the Client's Memorandum and Articles of Association
authorise and all necessary corporate action has been
taken to authorise the Client to enter into this
Agreement and each Supply Contract, to make Offers
pursuant hereto and to perform the transactions
contemplated hereby;
(i) neither the execution of this Agreement or the sale
of Debts hereunder nor the performance of any of the
transactions contemplated in this Agreement will:
(i) contravene or constitute a default under any
provision of the Client's Memorandum and
Articles of Association or
(ii) cause any limitation on it or the powers of
its directors to be exceeded whether imposed
by or contained in any agreement,
instrument, law, judgement, order licence,
permit or consent by which it or any of its
assets is bound or affected;
(j) no Termination Event has occurred; and
(k) the Client has fully disclosed to Five Arrows all
facts relating to the Client which the Client knows
or should reasonably know and which are material for
disclosure to Five Arrows in the context of this
Agreement.
11.2 The Client undertakes with Five Arrows until all its
liabilities under this agreement are finally discharged that
it will:
(a) duly and punctually perform all its obligations under
each Contract of Sale and not without Five Arrows's
prior written consent rescind vary or terminate a
Contract of Sale to which a Debt relates;
<PAGE> 17
(b) indemnify Five Arrows against any claim by a Customer
to reject the goods and/or work and/or services under
a Contract of Sale or to set-off or counter-claim any
amount and against all costs charges and expenses
incurred by Five Arrows as a result;
(c) pay to Five Arrows on demand an amount equal to any
cash discount or credit note issued to or debit note
issued by the Customer relied on in relation to any
Debt;
(d) comply with Five Arrows's reasonable accounting
administrative and procedural requirements in
relation to the operation of this Agreement; and
(e) notify Five Arrows promptly in writing as soon as
either any dispute with a Customer (whether justified
or not) arises or a Customer claims any set-off or
counter-claim relative to a Debt.
11.3 The Client also undertakes with Five Arrows that until all its
liabilities under this Agreement have been finally discharged:
(a) the liabilities of the Client under this Agreement
will rank at least equally and rateably (pari passu)
in point of priority and security with all its other
liabilities (both actual and contingent) except:
(i) liabilities which are subject to liens or
rights of set-off arising in the normal
course of trading and the aggregate amount
of which is not material;
(ii) liabilities which are preferred solely by
virtue of English law and not by reason of
any Security Interest;
(iii) liabilities which existed at and were
disclosed in writing to Five Arrows before,
the Commencement Date;
and the Client will not create or permit to exist
over all or any part of its business or assets any
Security Interest (other than any permitted under
sub-paragraph (i) above) without the prior written
consent of Five Arrows;
(b) save pursuant to this Agreement the Client shall not
nor shall the Client agree to factor, discount,
encumber, assign or deal with any of its debts
otherwise than getting in the same in the normal
course of trading and paying the proceeds to Five
Arrows or as it may direct;
(c) the Client will forthwith notify Five Arrows if it
becomes aware of the occurrence of any Termination
Event and provide Five Arrows with full
<PAGE> 18
details of the steps it is taking to remedy or
mitigate the effect of the Termination Event or
otherwise in connection with it;
(d) the Client will and will procure that its officers,
employees, agents and contractors will assist Five
Arrows in every lawful way to safeguard Five Arrows's
interests; and
(e) the Client will carry out any procedures Five Arrows
may reasonably require in relation to the day to day
administration of this Agreement.
11.4 The Client shall fully indemnify Five Arrows from and against
any expense loss damage or liability (as to the amount of
which a certificate of an Officer of Five Arrows shall in the
absence of manifest error be conclusive) which Five Arrows may
incur as a consequence of the occurrence of a Termination
Event. Without prejudice to its generality, the foregoing
indemnity shall extend to any interest fees or other sums
whatsoever paid or payable on account of any funds borrowed in
order to carry any unpaid amount and to any loss (including
loss of profit) premium penalty or expense which may be
incurred in liquidating or employing deposits from third
parties acquired to make maintain or fund any amount due or to
become due from the Client under this Agreement.
COLLECTIONS
12.1 For the purpose of facilitating the collection by Five Arrows
of Debts purchased hereunder the Client will as Five Arrows's
agent and at the Client's own expense collect the Debts. The
Client will, at such intervals as Five Arrows may instruct,
supply Five Arrows with reports of all monies collected by the
Client as Five Arrows's agent. Such agency may be terminated
forthwith by Five Arrows at any time by written notice to the
Client.
12.2 Should Notice of Assignment of all or any Debts be required to
be given pursuant to Clause 3.3 then the Client will not
thereafter attempt to obtain payment of all or any of those
Debts. The Client will co-operate with Five Arrows to secure
collection and enforcement of the same. Thereafter Five Arrows
and its assigns will have the sole and unfettered right to
collect such Debt, and to enforce payment thereof in such
manner and to such extent as Five Arrows shall in its absolute
discretion think fit, including without prejudice to the
foregoing either in its own and/or the Client's name
instituting carrying on or defending any legal proceedings
(whether in the UK or elsewhere) and settling compromising or
adjusting any claim. However, Five Arrows shall be under no
obligation to institute or defend any proceedings by or
against Five Arrows relating to such Debt. The Client agrees
to be bound by anything done by Five Arrows hereunder in such
collection or enforcement procedures.
<PAGE> 19
TRUST
13. All payments in respect of a Debt received by the Client shall
be held by the Client on trust for Five Arrows. Unless
otherwise directed by Five Arrows the Client will immediately
deliver to the Trust Account the identical cash, cheque, bill
of exchange or negotiable instrument, paying all bank charges
in respect thereof, and if necessary the Client will endorse
the cheque, bill of exchange or negotiable instrument to Five
Arrows prior to such delivery. If any formal assignment or
assignation of a Debt or of the other matters referred to in
Clause 3.3 hereof or the vesting in Five Arrows of a Debt
under Clause 3.1 hereof shall be of no effect at law then the
Client shall nevertheless hold the Debt and the said other
matters in trust for Five Arrows.
MISCELLANEOUS
14.1 Evidence of indebtedness
In any proceedings relating to this Agreement, a statement as
to any amount due to Five Arrows under this Agreement which is
certified as being correct by an Officer of Five Arrows shall
unless otherwise provided in this Agreement be prima facie
evidence that such amount is in fact due and payable.
14.2 Application of monies
If any sum paid or recovered in respect of the Client's
liabilities under this Agreement is less than the amount then
due, Five Arrows may apply that sum to any category of amount
due under this Agreement (whether in the nature of interest,
fees, charges, capital or revenue) in such proportions and
order and generally in such manner as Five Arrows may
determine.
14.3 Set-off
At any time Five Arrows may without notice to the Client
combine consolidate or merge all or any of the Client's
accounts with and liabilities to Five Arrows and may set-off
or transfer any sum standing to the credit of any such
accounts in or towards the satisfaction of any of The Client's
liabilities to Five Arrows under this Agreement and may do so
notwithstanding that the balances on such accounts and the
liabilities may not be expressed in the same currency and Five
Arrows is hereby authorised to effect any necessary
conversions at the Bank's rate of exchange then prevailing.
14.4 Exclusion of other terms, rights cumulative, waivers
(a) This Agreement, the Term Sheet and any Schedule
contain all the terms agreed between Five Arrows and
the Client to the exclusion of representations or
statements made by or on behalf of Five Arrows
whether orally or in writing prior to the making of
this Agreement.
<PAGE> 20
(b) Any variation to the Term Sheet shall be by a
substituted Term Sheet signed by Client and Five
Arrows.
(c) The rights of Five Arrows under this Agreement are
cumulative, may be exercised as often as it considers
appropriate and are in addition to its rights under
the general law. The rights of Five Arrows in
relation to this Agreement and/or any Schedule and/or
any purchase of Debts hereunder (whether arising
under this Agreement or under the general law) shall
not be capable of being waived or varied otherwise
than by an express waiver or variation in writing and
in particular any failure to exercise or delay in
exercising any of such rights shall not operate as a
waiver or variation of that or any other such right;
any defective or partial exercise of any such rights
shall not preclude any other or further exercise of
that or any other such right and no act, course of
conduct or negotiation on its part shall in any way
preclude Five Arrows from exercising any such right
or constitute a suspension or variation of any such
right.
14.5 Notices
Any notice or communication under or in connection with this
Agreement shall be in writing and in the case of notices or
communications to Five Arrows shall be given only by recorded
delivery or registered post to Five Arrows's registered office
or such other place as Five Arrows may last have notified to
the Client; and in the case of notices or communications to
the Client may be delivered personally or by first class
prepaid post or by telex or by facsimile transmission to the
address given in this Agreement or at such other address as
the Client may last have notified to Five Arrows in writing.
Proof of posting or despatch of any notice or communication to
the Client shall be deemed to be proof of receipt:
(a) in the case of a letter on the third Business Day
after posting;
(b) in the case of a telex and/or facsimile transmission
on the Business Day immediately following the date of
despatch.
14.6 Invalidity
If any of the provisions of this Agreement becomes invalid
illegal or unenforceable in any respect under any applicable
law, the validity legality and enforceability of the remaining
provisions shall not in any way be affected or impaired.
<PAGE> 21
14.7 Benefit of Agreement
Five Arrows may assign its rights under this Agreement or any
part thereof and/or with consent of the Client (which shall
not be unreasonably withheld or delayed) transfer its
obligations hereunder or any part thereof subject to the terms
of this Agreement and
(a) for this purpose may disclose to a potential assignee
or transferee such information about the Client as
shall have been made available to Five Arrows for the
purposes of the Agreement; and
(b) the Client shall execute such documents as are
reasonably necessary to release Five Arrows to the
extent of the transfer and join the transferee as a
party hereto.
The Client may not assign any of its rights or transfer any of
its obligations under this Agreement.
14.8 Change in Constitution of Client
This Agreement shall remain effective notwithstanding any
change in the constitution composition or legal personality of
the Client.
14.9 Plurality of Clients
Where, with Five Arrows's consent, the Client comprises two or
more persons, the Undertakings and Warranties contained in
this Agreement shall be deemed to be given by each of them and
each of the Client's obligations and liabilities hereunder
shall be joint and several and Five Arrows shall be at
liberty;
(i) to release or conclude a compromise with any one or
more of them without affecting its rights against the
other or others of them;
(ii) to treat a notice or demand by Five Arrows to any one
or more of them or to Five Arrows by any one or more
of them as a notice or demand given to or by the
other or others of them (but Five Arrows shall not be
obliged to treat such notice or demand in the manner
aforesaid).
The liability of any one or more persons comprised in the
Client shall not be affected or prejudiced by any act or
omission or any lack of corporate capacity or loss or identity
of any other or others of them.
<PAGE> 22
14.10 Power of Attorney
(a) As security for all sums due or to become due
hereunder from the Client to Five Arrows, the Client
hereby irrevocably appoints Five Arrows with power of
substitution to be the true and lawful attorney or
attorneys in the name of the Client or the attorney
or attorneys in accordance with Section 10 of the
Powers of Attorney Act 1971 and on the Client's
behalf as considered necessary by Five Arrows to:
(i) execute or sign assignments or assignations
of Debts and other Deeds and Documents
(ii) obtain payment of Debts
(iii) give notice of any assignment or assignation
of Debts to the Customer(s) concerned
(iv) complete deal with negotiate or endorse
negotiable instruments and other remittances
received from the Customer
(v) settle the indebtedness of the Client to
Five Arrows however arising
(vi) deal with or perfect Five Arrows's title to
the goods and services of the Client to
which the Debts relate and
(vii) secure the performance of any of the
Client's obligations under this Agreement
(in particular but without limitation under
Clause 14.7)
(b) Five Arrows is hereby empowered under the hand of any
of its Officers to appoint and remove any substitute
attorney or agent for the Client in respect of any of
the matters referred to above. The Client agrees to
ratify and confirm whatever Five Arrows any of its
Officers or its substitute attorney or agent shall do
by virtue of the powers granted above.
14.11 Governing Law
This Agreement the Term Sheet and each Schedule shall be
governed by and shall be construed in accordance with the laws
of England.
<PAGE> 23
14.12 Submission to Jurisdiction
The Client irrevocably:
(a) submits to the non-exclusive jurisdiction of the
Courts of England and Scotland as Five Arrows may
elect
(b) waives any objections on the ground of venue or forum
non-convenience or any similar grounds and
(c) consents to service of process by mail or in any
other manner permitted by the relevant laws.
IN WITNESS whereof the Client has executed this Agreement and Five Arrows has
caused this Agreement to be signed this 18th day of March 1999.
Executed by the Company )
HUGO INTERNATIONAL )
LIMITED )
acting by )
Director: /s/ D. W. Foden
Secretary: /s/ G. L. Foden
Signed by Mark Connelly
for and on behalf of ) /s/ Mark Connelly
FIVE ARROWS COMMERCIAL )
FINANCE LIMITED in the )
presence of: )
Miss P. Warren
Five Arrows Commercial Finance Ltd.
Kings Court
Exchange Street
Manchester
M2 3AX
<PAGE> 24
FIVE ARROWS COMMERCIAL FINANCE LIMITED
The Directors
Hugo International Limited
6 Waterside Drive
Slough Our ref: CTC/PB/3028
Berkshire
SL3 6EZ 14th June 2000
Dear Sirs,
RE: TERMINATION OF CONFIDENTIAL INVOICE DISCOUNTING AGREEMENT
DATED 18th MARCH 1999 (the "Agreement")
Further to your recent discussions with Jane Leverington, I write to confirm
our decision to terminate your Agreement with ourselves, with effect from 1st
June 2000, in line with Clause 6.2 of the above mentioned Agreement. As
discussed, the termination is subject to a six-month notice period, during
which time the advance rate will reduce on a monthly basis. (Subject to
satisfactory operation of your account.) As follows: 1/7/00 55%, 1/8/00 40%,
1/9/00 25%, 1/10/00 10%, 1/11/00 0%. All debts should continue to be assigned
to ourselves as previously.
It is with regret that the decision has been taken to terminate the facility.
However the above method of retrenchment of the facility should assist in
providing time for you to source alternative funding.
Should you have any queries regarding the above, please do not hesitate to
contact me.
Yours faithfully,
/s/ Clive Cosgrove
-----------------------
Clive Cosgrove
Audit Controller
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<S> <C> <C>
Five Arrows Commercial Finance Limited Telephone 0161 832 4462 Registered number 2227017 England
82 King Street Fax 0161 832 4050 Registered Office New Court
Manchester M1 4WQ St. Swithin's Lane
London EC4P DU
Regulated by SFA
V.A.T. No. 519 0706 S3
Newy 1:741282:1:8/2/00
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