EXHBIT 10.6
FTC
COMMERCIAL CORP.
July 28, 2008
Xxxxx Xxxx
Manager
X. XXXXXXXXX USA, LLC
000 X. Xxxxxxxxx Xxxx.
Los Angeles, CA 90291
Re: Inventory Loan Facility
Dear Xxxxx:
Reference is made to (i) the Factoring Agreement between FTC COMMERCIAL CORP.
("FTC") and X. XXXXXXXXX USA, LLC (the "Company") of even date herewith (as
supplemented or amended from time to time, the "Factoring Agreement") and (ii)
the Continuing Security Agreement between FTC and the Company of even date
herewith (as supplemented or amended from time to time, the "Security
Agreement"). The Factoring Agreement, the Security Agreement, and all agreements
now or hereafter entered into between FTC and the Company shall be referred to
herein collectively as the "Company Agreements."
Except as otherwise provided in this Inventory Loan Facility Agreement (this
"Agreement"), any capitalized terms used herein but and not defined in this
Agreement shall have the meanings assigned to such terms in the Factoring
Agreement.
For purposes of this Agreement:
"Inventory" as used herein shall have the meaning set forth in the
Security Agreement.
"Inventory Base" means up to fifty percent (50%) of the value (the
lesser of cost or market) of the Company's raw material and finished
goods Inventory which FTC determines, in its sole discretion, to be
eligible for inclusion in the Inventory Base. Without limiting the
generality of the foregoing, the following Inventory shall not be
eligible for inclusion in the Inventory Base if (i) such Inventory is
over one hundred twenty (120) days old; (ii) such Inventory is
defective or damaged; (iii) such Inventory is located at the J.
Lindeberg Retail Store located at 000 Xxxxxx Xxxxxx, Xxx Xxxx, XX 00000
or at any other X. Xxxxxxxxx Retail Store; (iv) such Inventory is
located at any real property leased by the Company or at any contract
warehouse, unless such Inventory is subject to a collateral access
agreement acceptable to FTC and executed by the lessor or warehouseman,
as the case may be, and unless such Inventory is separately
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identifiable from the goods of others, if any, stored on the premises;
(v) the Company does not have good, valid, and marketable title to such
Inventory; (vi) such Inventory is not subject to a valid and perfected
first priority security interest in favor of FTC; (vii) such Inventory
consists of bill and hold goods or goods acquired on consignment or
(vii) such Inventory consists of work in process.
"Obligations" means the any and all obligations and liabilities of the
Company under this Agreement and the Company Agreements.
This Agreement shall confirm our mutual understanding and agreement that,
subject to the terms and conditions of the Company Agreements, and provided that
no Event of Default under the Factoring Agreement or under the Security
Agreement, no material default under any of the other Company Agreements and no
termination of the Factoring Agreement has occurred, FTC may, in its sole and
absolute discretion, upon the request of the Company, extend an inventory loan
facility to the Company in an aggregate principal amount outstanding at any time
not to exceed an amount equal to the lesser of (i) up to $500,000 or (ii) up to
$1,500,000 LESS the aggregate amount of then outstanding factoring advances to
you under the Factoring Agreement or (iii) the Inventory Base.
The interest rate charged on outstanding inventory loans under this Agreement
will be the same rate charged in SECTION 24 of the Factoring Agreement and will
be calculated, computed and payable in accordance with the provisions of such
SECTION 24.
In order to induce FTC to extend the foregoing inventory loan facility to the
Company, the Company agrees that, so long as the Factoring Agreement remains in
effect and any of the Obligations have not been paid and performed in full:
i. The Company shall, no later than twenty (20) days after the
end of each month, provide to FTC: (a) an Inventory
Certification or designation in the form attached hereto as
"Attachment A" or in such other form as is acceptable to FTC;
(b) an aging of all Inventory as of the end of such month, in
form and substance acceptable to FTC; and (c) a report
detailing the piece goods, the work-in-process, the finished
goods Inventory available for sale, and the finished goods
Inventory sold as of the end of such month, in form and
substance acceptable to FTC.
ii. The Company shall not sell, lease, transfer, assign, abandon
or otherwise dispose of any of the Company's assets in which
FTC has been granted a security interest under any of the
Company Agreements, excluding sales of Inventory to the
Company's customers in the ordinary course of business.
iii. The Company shall not become a guarantor, a surety, or
otherwise liable for the debts or other obligations of any
other person or firm, including, without limitation, any
affiliate of the Company excluding debts or other obligations
of any affiliate of the Company to FTC.
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The inventory loan facility outlined in this Agreement shall be subject to the
satisfaction of each of the following conditions precedent in a manner
satisfactory to FTC:
i. The representations and warranties contained herein and in
each of the Company Agreements shall be true and correct as of
the date of any inventory loans the Company requests under
this Agreement.
ii. No default or Event of Default under any of the Company
Agreements shall have occurred or would occur as a result of
any inventory loans made to the Company under this Agreement.
iii. FTC shall have received duly executed originals of this
Agreement, the Company Agreements and the Continuing
Guaranties from People's Liberation, Inc., Versatile
Entertainment, Inc., Xxxxx Xxxx, LLC, and Xxxxxxx Xxxx
Sourcing, LLC, in form and substance acceptable to FTC and
dated as of the date of this Agreement.
Nothing herein shall be construed as limiting or modifying in any way any of
FTC's rights under any of the Company Agreements, including without limitation,
FTC's rights, to be exercised in its sole and absolute discretion, to hold any
reserve FTC deems necessary as security for payment and performance of the
Obligations, change any advance rates, cease making advances or other financial
accommodations to the Company and determine standards of eligibility. The
Obligations shall be secured by a first lien on and security interest in all of
the assets of the Company in which the Company has granted FTC a security
interest under the Company Agreements. The failure to perform any of the terms
and conditions of this Agreement or the breach of any of the representations or
warranties contained in this Agreement shall constitute an Event of Default
under the Factoring Agreement and under the Security Agreement and the
occurrence of an Event of Default under the Factoring Agreement or under the
Security Agreement or a material default under any of the other Company
Agreements shall constitute a default under this Agreement,
The foregoing is based upon the financial condition of the Company as
represented in the most recent financial statement provided by the Company to
FTC, which the Company has represented and warranted completely and correctly
reflects the Company's financial condition. In addition, by its signature below,
the Company further represents and warrants that there has been no material
adverse change in the Company's financial condition since such statement was
prepared.
THE COMPANY AND FTC HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY OF ANY
ACTION OR PROCEEDING ASSERTING ANY CAUSE OF ACTION, CLAIM, MOTION, THIRD PARTY
CLAIM OR COUNTERCLAIM (COLLECTIVELY, "ACTIONS") ARISING OUT OF OR RELATING TO
THIS AGREEMENT. THE COMPANY AND FTC DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING APPLICABLE STATE AND FEDERAL LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
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COMPANY AND FTC AGREE THAT A JUDICIAL REFEREE WILL BE APPOINTED UNDER CALIFORNIA
CODE OF CIVIL PROCEDURE SECTION 631 TO DETERMINE ANY FACTUAL ISSUES IN ANY
ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN
CONTRACT, TORT, OR OTHERWISE BETWEEN THE COMPANY AND FTC ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THIS AGREEMENT, THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED
THERETO. THE COMPANY AND FTC SHALL SELECT A SINGLE NEUTRAL REFEREE, WHO SHALL BE
A RETIRED STATE OR FEDERAL JUDGE WITH AT LEAST FIVE YEARS OF JUDICIAL EXPERIENCE
IN CIVIL MATTERS. IN THE EVENT THAT THE COMPANY AND FTC CANNOT AGREE UPON A
REFEREE, THE REFEREE SHALL BE APPOINTED BY THE COURT. THE COMPANY AND FTC SHALL
EQUALLY BEAR THE FEES AND EXPENSES OF THE REFEREE UNLESS THE REFEREE OTHERWISE
PROVIDES IN THE STATEMENT OF DECISION.
Please sign below to acknowledge that the Company is in agreement with all of
the foregoing.
Sincerely, ACCEPTED:
FTC COMMERCIAL CORP. X. XXXXXXXXX USA, LLC
/s/ Xxxxxxx X.Xxxxxxx /s/ Xxxxx Xxxx
By: _________________________ By: __________________________
Name: Xxxxxxx X. Xxxxxxx Name: Xxxxx Xxxx
Title: President Title: Manager
Accepted: August 6, 2008
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