NOTE 6 — FACTORED AND ACCOUNTS RECEIVABLES, NET

A&R Factoring Agreement

In January 2016, in connection with the RG Merger, we entered into the amended and restated deferred purchase factoring agreement with CIT, through our subsidiaries, Robert Graham Designs LLC and Hudson (the “A&R Factoring Agreement”), which replaced all prior agreements relating to factoring and inventory security. The A&R Factoring Agreement provides that we sell and assign to CIT certain of our accounts receivable, including accounts arising from or related to sales of inventory and the rendition of services. Under the A&R Factoring Agreement, we pay a factoring rate of (i) 0.20 percent for certain major department store accounts, (ii) 0.40 percent for all other accounts for which CIT bears the credit risk, subject to discretionary surcharges and (iii) 0.35 percent for accounts for which we bear the credit risk, but in no event less than $3.50 per invoice. The A&R Factoring Agreement may be terminated by CIT upon 60 days’ written notice or immediately upon the occurrence of an event of default as defined in the agreement. The A&R Factoring Agreement may be terminated by us upon 60 days’ written notice prior to December 31, 2020 or annually with 60 days’ written notice prior to December 31 of each year thereafter.

Prior to the RG Merger, we were also party to a deferred purchase factoring arrangement with CIT, which was terminated in connection with the RG Merger. See “Note 15 – Debt and Preferred Stock” below for further discussion of this and other RG debt arrangements prior to the RG Merger.

Factored and accounts receivables consist of the following (in thousands):


	June 30, 2016		December 31, 2015
Non-recourse receivables assigned to factor	$	16,439	$	5,456
Client recourse receivables		500		637
Total receivables assigned to factor		16,939		6,093

Allowance for customer credits		(4,784)		(1,176)
Factor accounts receivable, net	$	12,155	$	4,917

Non-factored accounts receivable	$	2,756	$	2,392
Allowance for customer credits		(1,126)		(484)
Allowance for doubtful accounts		(109)		(72)
Accounts receivable, net of allowance	$	1,521	$	1,836

Total factored and accounts receivable, net	$	13,676	$	6,753

Of the total amount of receivables sold by us as of June 30, 2016 and December 31, 2015, we hold the risk of payment of $500,000 and $637,000, respectively, in the event of non-payment by the customers.